Bloomberg News

Asian Stocks Pare Monthly Slump on U.S. Data Before Jobs Report

September 02, 2011

Sept. 3 (Bloomberg) -- Asian stocks rose this week, with a regional benchmark index paring the biggest monthly slump since May 2010, as exporters and commodity producers climbed on optimism the U.S. and Chinese economies are recovering.

Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., jumped 4.9 percent in Hong Kong after U.S. reports showing higher factory orders and consumer spending tempered concern that an economic recovery is faltering. Jiangxi Copper Co. advanced 10 percent as Chinese manufacturing expanded. Stocks fell Sept. 2 ahead of a U.S. jobs report that showed employment growth stagnated in August, paring the MSCI Asia Pacific Index’s greatest weekly gain since March.

“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 Platypus Asset Management Ltd. in Sydney. “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.”

The MSCI Asia Pacific Index rose 3.2 percent this week to 124.16, extending last week’s 0.7 percent advance. The gauge tumbled 14 percent in the previous four weeks as equity indexes in Australia, Hong Kong and Shanghai entered so-called bear markets, tumbling at least 20 percent from their peaks. The stocks rout was fueled by concern Europe’s debt crisis is worsening and after a U.S. credit rating downgrade by Standard & Poor’s.

S&P 500, Stoxx 600

Stocks in the Asian benchmark are valued at about 12.2 times estimated earnings on average, compared with 11.7 times for the S&P 500 and 9.7 times for the Stoxx 600.

Japan’s Nikkei 225 Stock Average gained 1.7 percent this week and South Korea’s Kospi Index jumped 5 percent. Australia’s S&P/ASX 200 Index advanced 1 percent in Sydney.

Hong Kong’s Hang Seng Index surged 3.2 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong climbed 3.5 percent after a report showed the nation’s manufacturing expanded at a faster pace in August. Chinese manufacturing increased from a 29-month low, indicating that the economy is withstanding attempts to cool prices.

China’s government has raised interest rates five times since the start of 2010 and boosted reserve requirements for banks to help control inflation. Stabilizing prices is the country’s top priority and the government doesn’t plan to alter the direction of economic policies, Premier Wen Jiabao said in an article that appeared Sept. 1 on the website of the Communist Party’s Qiushi magazine.

Economic Growth

China stock indexes may rise less than earlier estimated this year, Credit Suisse Group AG analysts wrote in a report this week, citing slower economic and corporate earnings growth. The Hang Seng China Enterprises Index estimate was lowered to 13,000 from 15,000.

Asian stocks climbed this week after reports showed U.S. consumer spending and car sales increased, while business activity and factory orders expanded at a faster pace than economists forecast. That bolstered gains after Federal Reserve Chairman Ben S. Bernanke said Aug. 26 that the nation’s central bank has more means to prop up growth if required.

The MSCI Asia Pacific index pared gains on Sept. 2 ahead of a report that showed the U.S. jobless rate remained at 9.1 percent, and after UBS AG lowered its year-end target for the MSCI Asia Pacific Index Excluding Japan Index by 13 percent. The bank said equities remain “broadly out of favor” amid signs global economic growth is slowing.

U.S. Revenue

Li & Fung, which gets about 65 percent of its revenue in the U.S., gained 4.9 percent to HK$13.84 in Hong Kong this week. Cathay Pacific Airways Ltd., Asia’s largest international carrier, rose 3.7 percent to HK$15.74.

James Hardie Industries SE, a building materials supplier that gets almost 68 percent of sales from the U.S., gained 4.9 percent to A$6.03 in Sydney. Honda climbed 2.5 percent to 2,507 yen in Tokyo, and South Korean exporter Samsung Electronics Co. jumped 5.9 percent to 769,000 won.

Mining and energy stocks advanced as New York-traded crude oil climbed 1.3 percent in the week, while the London Metal Index of prices for six metals, including copper and aluminum, advanced 0.4 percent.

Rio Tinto Group added 4.2 percent to A$72.05 in Sydney and BHP Billiton Ltd., the world’s No. 1 mining company and Australia’s biggest oil producer, rose 1 percent to A$39.04. In Hong Kong, Jiangxi Copper Co., China’s No. 1 producer of the metal, gained 10 percent to HK$21.95 and Chinese oil explorer Cnooc Ltd. surged 7.2 percent to HK$15.44.

Coal Producer

Among other Asian stocks that rose this week, China Shenhua Energy Co., a unit of the country’s largest coal producer, advanced 2.7 percent to HK$34.75 after reporting higher profit. Shimao Property Holdings Ltd., a China-based developer, advanced 14 percent to HK$8.55 after first-half net income increased 57 percent from a year earlier.

Fanuc Corp., a maker of industrial robots, gained 2.5 percent to 12,570 yen in Tokyo after JPMorgan Chase & Co, named the company its “top pick” among Japanese machinery manufacturers whose earning may benefit from growth in emerging markets. Komatsu Ltd., which counts China as its biggest market, increased 5.1 percent to 2,086 yen after the investment bank gave it a new “overweight” rating.

Belle International Holdings Ltd., China’s largest retailer of women’s shoes, climbed 5.2 percent to HK$16.22 in Hong Kong on optimism the mainland’s economy is withstanding anti- inflation measures after a Chinese manufacturing index climbed to 50.9 in August from 50.7 in July. Tencent Holdings Ltd., the nation’s biggest Internet company by revenue, advanced 6.8 percent to HK$187.30.

“The manufacturing data will remove concerns the slowdown in economic growth will be dramatic,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “The economic slowdown will be moderate this year and that will provide support for stocks.”

--With assistance from Jonathan Burgos in Singapore. Editors: Nick Gentle, Paul Tighe

To contact the reporters on this story: 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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