Bloomberg News

Asian Stocks Rise as Hyundai Heavy Jumps; Chinese Banks Plunge

July 06, 2011

July 6 (Bloomberg) -- Asian stocks rose, reversing earlier declines, as materials gained and Hyundai Heavy Industries Co. jumped in Seoul after a takeover bid collapsed. Chinese banks led financial shares lower after stake sales and on concern about credit quality.

Hyundai Heavy, a shipbuilder, jumped 6.4 percent after saying it won’t bid for control of Hynix Semiconductor Inc. Commodity companies advanced, led by BHP Billiton Ltd., as oil and gold climbed and after copper touched a 10-week high. Bank of China Ltd., the country’s fourth-largest lender by market value, tumbled to the lowest level in a year and China Construction Bank Corp., the No. 2, fell 3.2 percent after Singapore’s Temasek Holdings Pte sold stakes worth $3.6 billion.

The MSCI Asia Pacific Index climbed 0.3 percent to 137.41 as of 7:19 p.m. in Tokyo after falling 0.1 percent. About five stocks rose for every four that retreated on the 1,018-member gauge. Financial shares led losses after Moody’s Investors Service cut its rating on Portugal’s debt to junk status.

“Portugal’s downgrade was not really a huge surprise,” said Matt Riordan, who helps manage close to $7 billion in Sydney at Paradice Investment Management Pty. “I don’t think anybody’s overly concerned about the Chinese banks because the government at the end of the day has the capacity to recapitalize them if push came to shove. Overall, there’s a sense of confusion at the moment, and the market is looking for a signpost as to where exactly we are.”

Through yesterday, the index lost 2.8 percent from this year’s high on May 2 amid concern a slowing U.S. economy, Europe’s sovereign-debt crisis and China’s steps to curb inflation will crimp earnings.

Regional Benchmarks

Japan’s Nikkei 225 Stock Average advanced 1.1 percent, completing its seventh day of advance, the longest streak of increases since July 2009.

Australia’s S&P/ASX 200 Index climbed 0.2 percent. South Korea’s Kospi Index added 0.4 percent. Hong Kong’s Hang Seng Index declined 1 percent as China’s banks retreated.

In Seoul, Hyundai Heavy jumped 6.4 percent to 484,000 won after saying it ruled out bidding for a 15 percent stake in Hynix, which tumbled 5.4 percent to 26,500 won. Hyundai Heavy, which said last month it was interested, won’t submit a letter of intent for the stake by this week’s deadline, it said in a regulatory filing today. Hyundai Heavy was the second-largest boost to the MSCI Asia Pacific index, while Hynix was the No. 2 declining stock on the measure.

“Hyundai Heavy investors are cheering the company’s correct decision not to enter into totally unrelated business,” said Heo Pil Seok, chief executive officer of Seoul-based Midas International Asset Management Ltd., which oversees $2.1 billion in assets.

Commodities Increase

Material shares were among the biggest supports to the MSCI Asia Pacific Index today, rising 0.8 percent as a group, the third-most among the 10 industry sectors, after commodity prices increased.

BHP advanced 0.5 percent to A$44.45. Newcrest Mining Ltd., Australia biggest gold producer by market value, increased 1.8 percent to A$38.15. Cnooc Ltd., the Chinese offshore oil producer, added 0.5 percent to HK$18.30 in Hong Kong.

Crude oil for August delivery rose 0.6 percent, after advancing 2.1 percent yesterday. Copper futures for September delivery touched $4.354 yesterday in New York, the highest since April 27. The London Metal Exchange Index of prices for six metals, including aluminum and zinc, rose 1.2 percent yesterday, the highest level since May 3. Gold climbed the most in five weeks yesterday.

In Taiwan, HTC Corp. jumped 3.3 percent before the release of its second-quarter earnings today?The company, which was among the biggest supports to the Asia-Pacific gauge, posted record quarterly profit that beat analysts’ estimates after the close of trading. Second-quarter net income more than doubled to NT$17.5 billion ($608 million), the company said.

Financials Drop

Financial shares were the biggest drags on the MSCI Asia Pacific Index after Moody’s Investors Service cut Portugal’s credit rating and warned that the credit outlook for China’s banking industry could decline.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The S&P slid 0.1 percent yesterday, ending the index’s five-day winning streak, after Moody’s cut Portugal’s long-term government bond ratings to Ba2, or junk, from Baa1. Portugal is the second euro country rated non-investment grade by Moody’s, joining Greece.

Bank of China slumped 3.6 percent to HK$3.72 in Hong Kong as volume spiked to the highest since January 2009, while China Construction Bank declined 3.2 percent to HK$6.27. Industrial & Commercial Bank of China Ltd., the world’s largest listed lender by market capitalization, slid 2.5 percent to HK$5.78. They were the three biggest drags on the MSCI Asia Pacific Index.

Financial stocks fell after Singapore’s state-owned investment company, Temasek Holdings Pte, sold about HK$28.2 billion ($3.63 billion) worth of shares in China Construction Bank and Bank of China, according to data compiled by Bloomberg. Jeffrey Fang, a spokesman for Temasek, declined to comment.

‘Strategic Investors’ Sell

“Temasek is considered a strategic investor and they’ve sold down a large chunk,” said Diane Lin, a Sydney-based Asian equities fund manager at Pengana Capital Ltd., which has about $1 billion in global assets. “If major strategic investors are getting out, minority shareholders have to ask why they’re doing so at this very moment.”

The Chinese banks extended declines into a second day after Moody’s said yesterday that problem loans to local governments may exceed official estimates for the nation’s lenders, and that the credit outlook for the industry could decline.

China, Portugal

Financial stocks also fell after Moody’s lowered its outlook on the Portugal’s long-term government bonds on concern the southern European country will need to follow Greece in seeking a second international bailout.

Commonwealth Bank of Australia lost 0.6 percent to A$51.47, while Westpac Banking Corp., Australia’s second-biggest bank by market value, dipped 0.4 percent to A$21.89. Mitsubishi UFJ Financial Group Inc., Japan’s largest-listed lender by assets, lost 0.5 percent to 410 yen in Tokyo.

The MSCI Asia Pacific Index lost 0.5 percent this year through yesterday, compared with a gain of 6.4 percent by the Standard & Poor’s 500 and a drop of 0.1 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.7 times estimated earnings on average, compared with 13.4 times for the S&P 500 and 11.2 times for the Stoxx 600.

--With assistance from Jun Yang and Seonjin Cha in Seoul, Tim Culpan in Taipei. Editors: Nick Gentle, John McCluskey.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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