Bloomberg News

Asian Stocks Rise Amid Optimism on China Stimulus Outlook

July 16, 2012

Asian stocks rose after Premier Wen Jiabao said China will increase measures to support growth in the world’s second-largest economy. Gains were limited amid concern about falling profits for Asian companies.

Guangzhou R&F Properties Ltd., a developer in the southern Chinese city, advanced 3.9 percent in Hong Kong. Whitehaven Coal Ltd. (WHC) soared 18 percent after Australian mining magnate Nathan Tinkler offered to buy out the rest of the coal producer. Daekyung Machinery & Engineering Co. fell 8.3 percent in Seoul after a shipmaker dropped its bid for the chemical machinery maker. ZTE Corp., a Chinese telecommunications equipment maker, slumped 16 percent after saying first-half profit may plunge 80 percent.

The MSCI Asia Pacific excluding Japan Index rose 0.3 percent to 403.63 as of 5:15 p.m. in Hong Kong, with almost three stocks gaining for every two that declined. Japan’s equity markets are closed today for a public holiday.

“There remains significant capacity for China to stimulate further,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management. “This is not only from a monetary perspective, which includes further rate cuts or lowering the reserve required ratio again, but also the ability for additional targeted fiscal stimulus.”

Global Growth

The MSCI Asia-Pacific excluding Japan Index fell 2.6 percent last week, the largest weekly drop since May, amid concern slowing economic growth from China to South Korea and Australia will hurt corporate profits. Shares in the gauge are valued at 11.1 times estimated earnings on average, compared with 13.1 times for the Standard & Poor’s 500 Index and 10.7 times for the Stoxx Europe 600 Index.

Hong Kong’s Hang Seng Index rose 0.2 percent, while China’s Shanghai Composite Index retreated 1.7 percent. Singapore’s Straits Times Index climbed 0.1 percent, its 12th advance in the last 14 trading days.

Australia’s S&P/ASX 200 Index (AS51) advanced 0.6 percent, while New Zealand’s NZX 50 Index fell 0.8 percent. South Korea’s Kospi Index rose 0.3 percent.

Premier Wen warned the momentum for a recovery in Chinese economic growth isn’t yet in place and that “difficulties” may persist for a while, the official Xinhua News Agency reported yesterday. The government will step up policy fine-tuning in the second half of this year to support growth, he said, reiterating comments he made during a visit to eastern Jiangsu province earlier this month.

China GDP

China needs to expand consumption and restructure the economy, Vice Premier Li Keqiang said during an inspection tour in central Hubei province, Xinhua reported separately on July 14. The reports come after China’s gross domestic product expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years.

Guangzhou R&F advanced 3.9 percent to HK$10.58. Belle International Holdings Ltd., a women’s shoe retailer that gets most of its revenue from China, rose 1.9 percent to HK$13.88 in Hong Kong.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The underlying gauge gained 0.2 percent last week as a rally in shares of JPMorgan Chase & Co. (JPM:US) and speculation China will boost stimulus measures tempered concern about earnings and the global economy.

Four of the six S&P 500 listed companies that reported earnings last week beat analysts’ estimates while one missed, according to data compiled by Bloomberg. Analysts predict earnings of S&P 500 listed companies will increase 6.4 percent this year.

Asian Earnings

In Asia, 9 of 23 companies in the MSCI Asia Pacific Index (MXAP) that reported earnings this month exceeded analyst estimates, according to data compiled by Bloomberg. Analysts expect profit at companies in the Asia-Pacific gauge will increase 28 percent over the next 12 months in U.S. dollar terms.

Whitehaven surged 18 percent to A$4.07 in Sydney. A Tinkler-led group made a conditional offer to buy the rest of the miner at a 51 percent premium to its most recent closing price, valuing the company at A$5.3 billion ($5.4 billion).

BHP Billiton Ltd. the world’s largest mining company, rose 1 percent to A$30.77 to be the second-biggest contributor to the Asian gauge’s advance. The company was rated new overweight at Barclays Plc. BHP is the least complicated and the least risky way to gain exposure to commodities, according to Barclays analyst Ephrem Ravi.

Daekyung Machinery slumped 8.3 percent to 2,000 won in Seoul. Daewoo Shipbuilding & Marine Engineering Co. (042660), which constructs naval and commercial ships, said it dropped its bid for Daekyung on failure to negotiate a price and amid changes in the global economic environment. Daewoo Shipbuilding rose 1.2 percent to 25,600 won.

Profit Warnings

ZTE plunged 16 percent to HK$10.46 in Hong Kong after saying its first-half profit may have fallen as much as 80 percent due to reduced investment income, foreign-exchange losses and delayed network contracts.

Suning Appliance Co., China’s biggest home appliance retailer by market value, dropped 10 percent to 7.28 yuan in Shenzhen after saying its first-half profit probably dropped as much as 30 percent from a year earlier.

Sun Hung Kai Properties Ltd. (16), a developer whose chairmen were charged along with Hong Kong’s former No. 2 official over alleged bribery-related offenses, declined 1 percent to HK$94.50 when it resumed trading in Hong Kong today.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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