Bloomberg News

Asian Stocks Post Best Quarter Since 2010 on Bernanke

March 30, 2012

Asian stocks rose this week, with the regional benchmark index capping its biggest quarterly gain since 2010, after Federal Reserve Chairman Ben S. Bernanke said accommodative monetary policy is still needed. Gains were limited amid concern China’s economic slowdown is weighing on company earnings.

Sharp Corp., which fell to a 30-year low earlier this month, surged 27 percent this week in Tokyo after Foxconn Technology Group agreed to buy a stake in the display maker. Toyota Motor Corp., Asia’s biggest carmaker by market value, rose 3 percent. Korea Gas Corp. (036460), the world’s largest buyer of liquefied natural gas, gained 12 percent in Seoul after its Italian partner found reserves in Mozambique. Sun Hung Kai Properties Ltd. (16), the world No. 2 real estate company, plunged 9.8 percent in Hong Kong after the firm’s co-chairmen were arrested in a corruption probe.

“You just don’t have sustainability for the markets to reweight higher like they did three or four months ago,” Andrew Pease, Sydney-based chief investment strategist for the Asia- Pacific region at Russell Investment Group, which manages about $150 billion. “You are not going to see any acceleration from here and you may actually feel a bit of moderation” in the U.S.

The MSCI Asia Pacific Index (MXAP) rose 0.2 percent to 126.60 this week. The measure jumped 11 percent for the first three months this year, as U.S. economic optimism and monetary easing in Europe, Japan and China fueled the fastest quarterly rally since September 2010.

Japan’s Nikkei 225 Stock Average (NKY) gained 0.7 percent this week, taking its advance through the quarter to 19 percent, the biggest rise among developed market benchmark indexes. It this week recouped losses of as much as 20 percent from last year’s quake and nuclear disaster.

Shanghai Slumps

Australia’s S&P/ASX 200 Index rose 1.5 percent while Singapore’s Straits Times Index (FSSTI) rose 0.7 percent. South Korea’s Kospi Index slid 0.6 percent.

The Shanghai Composite Index slumped 3.7 percent this week. The gauge tumbled the most in four months on March 28 after Societe Generale SA said Chinese corporate profits won’t grow at all this year.

Hong Kong’s Hang Seng Index slid 0.6 percent on concern that earnings will slow and as Sun Hung Kai dropped 9.8 percent to HK$96.50 following the arrest of Co-chairmen Thomas and Raymond Kwok by the city’s anti-corruption agency.

Measures of volatility dropped across the region this week. The Kospi 200 Volatility Index (VKOSPI) touched its lowest level since July and the Hang Seng Index Volatility Index fell to a level not seen since August on March 27.

Accommodative Policy

The Federal Reserve’s Bernanke said on March 26 that while he’s encouraged by the unemployment rate’s decline to 8.3 percent, continued accommodative monetary policy will be needed to make further progress. Stocks gained the following day as some investors bet Bernanke’s comments indicate further policy easing is still under consideration.

Toyota rose 3 percent to 3,570 yen in Tokyo, while Billabong International Ltd. (BBH), a surfwear company that counts the Americas as its biggest market, increased 1.8 percent to A$2.78 in Sydney.

Fed policy makers “still have an option of doing more, but I think it was just reinforcing the view that they are not going to reverse policy quickly,” said Stephen Halmarick, Sydney- based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “There’s going to be a lot of liquidity provided for the market and economy. Obviously equity investors are taking it in a positive way.”

Foxconn, Sharp

Sharp surged 27 percent to 604 yen this week in Tokyo, the biggest five-day gain in the MSCI Asia Index, after Foxconn Technology and founder Terry Gou agreed to invest 133 billion yen ($1.62 billion) in the TV maker and its display unit.

Gou’s flagship Hon Hai Precision Industry Co. rose 8 percent to NT$114.50 through the week as it announced fourth- quarter net income which climbed 64 percent to NT$35 billion ($1.19 billion) surpassing each of the nine analysts’ estimates compiled by Bloomberg, and the average of NT$26.6 billion.

Korea Gas jumped 12 percent to 43,150 won this week in Seoul after its partner Eni SpA, an Italian oil company, found reserves in Mozambique that may exceed those of the U.K.

Renhe Commercial Holdings Co. (1387), a developer of underground shopping centers in China, slumped 39 percent to 54 Hong Kong cents in Hong Kong this week, the steepest five-day drop in the MSCI Asia Pacific Index. Underlying profit fell more than 90 percent and Moody’s Investors Service cut its credit rating two levels to B3, six ranks below investment grade.

‘Cautious on China’

“We are concerned about China’s macro economy and you’ve seen some of the slowdown in growth rates in some of the companies.” said Tim Cunningham, who helps oversee $83 billion of assets, including Chinese stocks, at Thornburg Investment Management Inc. in Santa Fe, New Mexico. “We’re a little cautious on China overall and we’ve cut back our weight.”

Of the 179 companies in the Shanghai Composite that reported quarterly net income this week as of the market close, almost twice as many companies missed analyst estimates as those that exceeded them.

Jiangxi Copper Co. (600362), China’s biggest producer of the metal, dropped 6.4 percent to 23.91 yuan in Shanghai after recording an 18 percent decline in second-half profit.

Li & Fung Ltd. (494), a supplier of clothes and toys to retailers, slumped 10 percent to HK$17.82 in Hong Kong after saying it’s selling 210 million shares at HK$18.62 each to boost general working capital, which may be used for acquisitions.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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


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