Bloomberg News

Asian Stocks Rise After China’s Economy Maintains Momentum

July 13, 2011

July 13 (Bloomberg) -- Asian stocks rose for the first time in three days as reports showed China’s economy expanded more than estimated in the second quarter, easing concern tightening measures are curbing growth, and as investors weigh efforts to contain Europe’s debt crisis.

China Construction Bank Corp., the nation’s second-biggest lender, climbed 2.2 percent in Hong Kong on speculation the central bank may soon halt interest rate increases as economic growth slows. Jiangxi Copper Co., China’s largest producer of the metal, jumped 5.1 percent after saying its first-half net income likely increased. Mitsubishi Corp., a Japanese trading house, climbed 1.8 percent in Tokyo after Credit Suisse initiated coverage of the sector with an “overweight” rating.

The MSCI Asia Pacific Index advanced 0.9 percent to 135.69 as of 5:47 p.m. in Tokyo, with two stocks rising for each that fell. The gauge last week extended its rally for a third week as European Union leaders hammered out proposals to roll over debt to prevent Greece from defaulting and after reports showed retail sales in the U.S. increased in June and China’s latest interest rate increase sparked speculation the tightening cycle may end soon.

“Any evidence of a soft landing in China will be welcomed by the market because that’s what Beijing has been trying to engineer since the tightening began late last year,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management in Sydney. “There is a solid commitment around the world to see that the European situation doesn’t send us back to days of the 2008 global financial crisis.”

‘Cooling Growth’

China’s gross domestic product expanded 9.5 percent from a year earlier, the statistics bureau said in Beijing today, after a 9.7 percent gain in the first quarter. That compared with the median 9.3 percent estimate in a Bloomberg News survey of 18 economists. Industrial production rose a more-than-estimated 15.1 percent in June, the agency said. Analysts had forecast an increase of 13.1 percent.

“The numbers show that China is managing to cool growth, and that should go a long way towards easing the ‘hard-landing’ fears,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which has almost $100 billion under management globally. “The fact that growth is softening should also allow the authorities to take their foot off the monetary brake.”

Lenders rallied on speculation China’s tightening efforts, which include raising interest rates and bank reserves, may end soon. China Construction Bank climbed 2.2 percent to HK$6.08 in Hong Kong. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, gained 2.2 percent to HK$5.63. Smaller rival Bank of China Ltd. increased 2.3 percent to HK$3.59.

Japan’s Nikkei 225 Stock Average rose 0.4 percent, having swung between gains and losses at least seven times. South Korea’s Kospi Index gained 0.9 percent. Hong Kong’s Hang Seng Index both climbed 1.2 percent. China’s Shanghai Composite Index increased 1.5 percent. Australia’s S&P/ASX 200 Index added 0.4 percent.

U.S. Futures

Futures on the Standard & Poor’s 500 Index rose 0.5 percent today. The index dropped 0.4 percent to 1,313.64 in New York yesterday after the downgrading of Ireland’s credit rating to junk added to concerns Europe is losing control of the credit crisis and overshadowed evidence that the U.S. Federal Reserve hasn’t ruled out more stimulus.

The MSCI All-Country World Index declined 0.7 percent yesterday after Ireland joined Portugal and Greece as the third euro-area nation to have its credit rating reduced to below investment grade as European Union finance ministers struggle to contain the region’s sovereign debt crisis. Moody’s Investors Service yesterday cut Ireland to Ba1 from Baa3, citing the probability that the country will need additional official financing before it can return to the private market to borrow.

In the U.S., policymakers continued to debate whether additional stimulus will be needed if the outlook for economic growth remains weak, minutes from the Federal Open Market Committee’s June meeting showed yesterday. Chairman Ben S. Bernanke will testify before congress later today.

Commodity Stocks

Gauges of energy companies and raw material producers led the advance among the 10 industry groups in the MSCI Asia Pacific Index. All but one of the sub-indexes gained.

Jiangxi Copper climbed 5.1 percent to HK$26.70 after saying its first-half net income likely increased more than 50 percent from a year earlier on higher output and price of the commodity.

Japanese commodity suppliers climbed after Credit Suisse Group AG rated the sector an “overweight,” citing the stocks’ low valuations. Inpex Corp., Japan’s biggest energy explorer, increased 2.1 percent to 596,000 yen. Mitsubishi Corp., which gets about 43 percent of revenue from commodity, gained 1.8 percent to 2,069 yen.

Portek Bidding War?

Rival Mitsui & Co. also climbed 2.1 percent to 1,432 yen after making a takeover offer of S$1.40 per share for Portek International Ltd., which operates port facilities in Indonesia, Algeria, Malta and Gabon. The Mitsui offer exceeded a S$1.20 per share bid by Philippine-based International Container Terminal Services Inc. Singapore-based Portek surged 6.1 percent to S$1.40.

International Container Terminal is studying its options “to determine what’s best for our shareholders,” Rafael Consing, treasurer at the Manila-based company, said in a phone interview. A unit of the company unit owns 16.7 percent of Portek, according to data compiled by Bloomberg.

The MSCI Asia Pacific Index lost 2.4 percent this year through yesterday, compared with a gain of 4.5 percent by the S&P 500 and a drop of 2.8 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.5 times estimated earnings on average, compared with 13.2 times for the S&P 500 and 10.7 times for the Stoxx 600.

Gold producers advanced after the precious metal’s price rose to a record as Europe’s escalating debt crisis boosted demand for safe-haven investments. Newcrest Mining gained 0.7 percent to A$38.96. Zijin Mining Group Co., China’s biggest producer of bullion, jumped 5.1 percent to HK$4.16 in Hong Kong.

--Editors: John McCluskey, Nick Gentle.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@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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