Bloomberg News

Asia Stocks Set for Best Streak Since January on Factory Orders

September 01, 2011

Sept. 1 (Bloomberg) -- Asian stocks climbed, with the regional benchmark index set for its longest streak of gains since January, as manufacturing in China and the U.S. expanded, boosting the outlook for exporters and machinery makers.

James Hardie Industries SE, a supplier of building materials that counts the U.S. as its biggest market, gained 3.5 percent in Sydney. Li & Fung Ltd., a supplier of toys and clothes to U.S. retailers including Wal-Mart Stores Inc., surged 5.7 percent after the company’s chairman said sales are recovering. Komatsu Ltd., Japan’s largest maker of construction machinery, jumped 4.2 percent after being rated “overweight” by JPMorgan Chase & Co.

The MSCI Asia Pacific Index gained 0.3 percent to 125.32 as of 5:25 p.m. in Tokyo, paring an advance of as much as 1.4 percent earlier. Five stocks advanced for every three that fell in the gauge. The measure slumped 8.6 percent last month, the most since May 2010, amid concern global economic growth is slowing as Europe’s sovereign debt crisis spreads and after Standard & Poor’s cut the U.S. credit rating.

“Concern about the health of the U.S. economy was near the top of the laundry list of worries for investors,” said Prasad Patkar, who helps manage the equivalent of $1.1 billion at Sydney-based Platypus Asset Management Ltd. “If the data keeps reinforcing the idea that a new recession is unlikely, markets could rally strongly this quarter. The latest manufacturing data confirms that China’s economy was never headed for a hard landing.”

U.S. Futures

Japan’s Nikkei 225 Stock Average rose 1.2 percent. Australia’s S&P/ASX 200 Index added 0.3 percent. Hong Kong’s Hang Seng Index gained 0.3, paring an earlier advance of as much as 2.1 percent. South Korea’s Kospi Index closed little changed, after rising as much as 2.6 percent earlier. Markets in India and Indonesia were shut for holidays.

Futures on the Standard & Poor’s 500 Index dropped 0.4 percent today, wiping out gains of as much as 0.5 percent earlier. In New York, the index rose 0.5 percent yesterday after a report showed orders placed with U.S. factories rose by most in four months, beating economist estimates. Another report showed business activity in the U.S. expanded in August at a faster pace than economists forecast, allaying concern that manufacturing was slumping.

Exporters advanced on speculation shipments to the U.S., the biggest market for Asian products, will increase. James Hardie jumped 3.5 percent to A$6.16 in Sydney. Honda Motor Co., a carmaker that gets 44 percent of sales from North America, rose 3.4 percent to 2,557 yen in Tokyo. Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, gained 3.6 percent to 771,000 won in Seoul.

‘Little Slower’

Li & Fung, which counts the U.S. as its biggest market, surged 5.7 percent to HK$14.84 in Hong Kong. The recovery in retail sales is a “little slower” than anticipated, Chairman Victor Fung said in an interview on Aug. 30. “The key thing is it is recovering.”

PCCW Ltd., Hong Kong’s biggest phone company, climbed 3.9 percent to HK$3.47. The company plans to raise as much as $2 billion by listing its telecommunications assets as a business trust in Hong Kong in late October, two people with knowledge of the matter said.

China’s Shanghai Composite Index lost 0.4 percent after a report by the China Federation of Logistics and Purchasing showed a gauge of the nation’s manufacturing activity expanded in July at a slower pace than economists had forecast. A separate measure released by HSBC Holdings Plc contracted for the second month.

Growth Driver

Fanuc Corp., a maker of industrial robots, climbed 2.8 percent to 12,970 yen in Tokyo. JPMorgan named the company its “top pick” among 10 Japanese machinery manufacturers it started covering, saying earnings will be driven by growth in emerging markets.

Komatsu, which counts China as its biggest market, increased 4.2 percent to 2,109 yen in Tokyo. JPMorgan rated the stock “overweight” in new coverage.

“We expect emerging markets to remain the main driver of growth,” JPMorgan analyst Toru Nakahashi wrote in a report dated yesterday. “Although China has recently shifted to monetary tightening, we think its stance will gradually ease toward the end of the year.”

Earnings Performance

Of the 701 companies on the MSCI Asia Pacific Index that reported net income since July 11, 44 percent surpassed analyst estimates, while 35 percent fell short, according to data compiled by Bloomberg.

Shimao Property Holdings Ltd., a China-based developer, advanced 5.6 percent to HK$8.65 in Hong Kong after saying first- half net income increased 57 percent from a year earlier.

Compal Electronics Inc., the world’s second-largest contract maker of computer notebooks, slumped 6.1 percent to NT$29.20 in Taipei after posting second-quarter profit that missed analyst estimates and cutting its full-year shipment forecast.

The MSCI Asia Pacific Index declined 9.3 percent this year through yesterday, compared with a 3.1 percent drop by the S&P 500 and a 14 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 12.3 times estimated earnings on average, compared with 12.2 times for the S&P 500 and 9.9 times for the Stoxx 600.

--With assistance from Anna Kitanaka in Tokyo. Editors: Jim McDonald, John McCluskey

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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