Bloomberg News

Asian Stocks Rise as China Data, Europe Talks Ease Concerns

October 24, 2011

Oct. 24 (Bloomberg) -- Asian stocks climbed for a second day as a report showed China’s manufacturing may expand for the first time in four months and after European leaders inched toward a revamped strategy to contain the region’s debt crisis.

Honda Motor Co., a carmaker that gets more than 80 percent of sales overseas, rose 2.6 percent in Tokyo after Japan reported better-than-estimated exports. Industrial & Commercial Bank of China Ltd. led Chinese lenders higher after Barclays Plc said the banks will post “strong” third-quarter earnings. BHP Billiton Ltd., the largest global mining company, advanced 3.2 percent in Sydney after copper futures extended gains.

The MSCI Asia Pacific Index increased 2.6 percent to 118.99 as of 7:40 p.m. in Tokyo. The gauge of Asian stocks last week had its biggest weekly decline in a month after Germany said there would be no quick fix to the debt crisis at a weekend summit of European leaders in Brussels.

“Economic expectations got so depressed during the September market rout that any signs of improvement in the economic outlook should have a positive effect on the market,” Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., said by telephone. “There was no clear sign of division among European leaders, but there is also some disappointment that nothing concrete was announced.”

Withstanding Europe Crisis

Japan’s Nikkei 225 Stock Average gained 1.9 percent after a report showed exports rose more than expected last month. South Korea’s Kospi Index climbed 3.3 percent and Australia’s S&P/ASX 200 rose 2.7 percent.

China’s Shanghai Composite Index advanced 2.3 percent after a report showed China’s manufacturing may expand in October. Hong Kong’s Hang Seng Index jumped 4.1 percent, the most among Asia-Pacific indexes.

Shares extended their gains as the Chinese manufacturing report, along with the Japanese export data, signaled that Asia’s largest two economies are withstanding Europe’s sovereign debt crisis.

Futures on the Standard & Poor’s 500 Index were little changed today, erasing gains of up to 0.6 percent and losses of as much as 0.7 percent. The gauge climbed 1.9 percent on Oct. 21, capping its longest weekly rally since February, as European governments considered deploying $1.3 trillion in funds to tame the crisis.

European leaders in Brussels yesterday outlined plans to aid banks, heading toward a revamped strategy to contain the debt crisis. The 13th crisis-management summit in 21 months excluded a forced restructuring of Greece’s debt, sticking with the policy of enticing bondholders to accept “voluntary” losses to help restore the country’s finances. The complete blueprint for the rescue fund will be formed Oct. 26.

Bridgestone, Samsung Engineering

Japanese exporters climbed after a report showed the nation’s shipments increased more than expected in September as demand for cars and auto parts rose, a sign the recovery in shipments is withstanding a weakening global economy.

Honda Motor advanced 2.6 percent to 2,355 yen. Toyota Motor Corp., the world’s biggest carmaker by market value, rose 1.3 percent to 2,580 yen and Suzuki Motor Corp., Japan’s No. 4 automaker by sales, climbed 2.7 percent to 1,682 yen.

Bridgestone Corp., a tiremaker, jumped 4.1 percent to 1,764 yen. The company aims to boost annual sales to 3.6 trillion yen ($47 billion) by 2012 as it expands production in China to meet rising demand, Chief Financial Officer Akihiro Eto said on Oct. 21.

Samsung Engineering Co., South Korea’s biggest construction and engineering company by market value, surged 6.3 percent to 237,500 won. The company’s third-quarter operating profit more than doubled to 212.9 billion won ($187.5 million).

‘Too Bearish’

Chinese banks rallied after Barclays said the Hong Kong- listed lenders may post 32 percent profit growth on average in the third quarter. Industrial & Commercial Bank of China surged 5.8 percent to HK$4.39. China Construction Bank Corp., the nation’s second-biggest lender, climbed 4.1 percent to HK$5.33. Bank of China Ltd. increased 6 percent to HK$2.81.

“We believe the current share prices may reflect too bearish a scenario for asset quality deterioration,” Barclays analysts May Yan and Shujin Chen wrote in a report today. “Negative news flow may have peaked.”

China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output.

The reading of 51.1 for the index released by HSBC Holdings Plc and Markit Economics today was the highest in five months and compares with the final reading of 49.9 for September and August. A reading above 50 indicates expansion.

Raw material producers advanced as copper and oil futures extended gains. BHP Billiton gained 3.2 percent to A$36.85 in Sydney. Korea Zinc Co., South Korea’s biggest zinc smelter, surged 13 percent to 319,000 won in Seoul. Cnooc Ltd., China’s largest offshore oil producer, increased 6.5 percent to HK$13.68 in Tokyo.

FBI Investigation

The MSCI Asia Pacific Index declined 16 percent this year through Oct. 21, compared with a 1.5 percent drop by the S&P 500 and a 13 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.8 times estimated earnings on average, compared with 12.5 times for the S&P 500 and 10.3 times for the Stoxx 600.

Among stocks that dropped, Olympus Corp., a maker of endoscopes that’s embroiled in a scandal about $687 million in payments to advisers, plunged 11 percent to 1,099 yen, its lowest close since 1998. The U.S. Federal Bureau of Investigation is investigating payouts by Olympus to advisers on a 2008 acquisition, the New York Times reported, citing two people briefed on the case, without disclosing their names.

Tsuyoshi Kitada, an Olympus spokesman, said the company had no information on any FBI investigation. Shares have fallen by 56 percent in the seven trading days since the ouster of former president Michael C. Woodford on Oct. 14. Woodford has said he was fired for challenging the payouts.

--Editors: Nick Gentle, 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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