Bloomberg News

Asian Stocks Post Weekly Climb Amid China Stimulus Speculation

July 20, 2012

Asian stocks rose, with the regional benchmark gauge posting its largest weekly gain this month, amid speculation China and the U.S. will do more to boost growth in the world’s two largest economies.

China Railway Construction Corp. (1186) surged 6.2 percent in Hong Kong, leading gains among infrastructure stocks. BHP Billiton Ltd. (BHP) advanced 2.9 percent in Sydney as rising commodity prices boosted the earnings outlook for the world’s biggest mining company. ZTE Corp. (763), China’s second-biggest maker of telecommunications equipment, slumped 16 percent after saying first-half profit may have dropped as much as 80 percent.

The MSCI Asia Pacific Index (MXAP) gained 1.2 percent to 116.66, its largest weekly advance in three weeks. Concern that growth in China’s economy will slow as Europe’s debt crisis deepens has dragged down the regional benchmark gauge 9.4 percent from this year’s peak in February.

“China is the only country where they have more power to stimulate the economy,” Pu Yonghao, Hong Kong-based regional chief investment officer for Asia Pacific at UBS Wealth Management, said in a Bloomberg TV interview. The Swiss bank oversees about $1.5 trillion in assets. “We are betting that in the second half of the year they should be able to turn the economy around. On a long-term valuation basis we expect some kind of 10 percent upside by year-end” for Asian equities, without specifying any particular benchmark.

The MSCI Asia Pacific trades at 11.8 times estimated earnings, compared with a multiple of 13.3 for the Standard & Poor’s 500 Index and 11 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Fed Ready

Shares rose this week after Federal Reserve Chairman Ben S. Bernanke told the Senate that the central bank stood ready for additional easing to combat high unemployment, with tools that include further asset purchases and cutting the interest rate on banks’ reserves deposited at the Fed.

“There will be some more action from the Federal Reserve,” said Ewen Cameron-Watt, chief investment strategist in London at the BlackRock Investment Institute, part of BlackRock Inc., which manages about $3.7 trillion of assets. “The U.S. economy remains in a slow-growth environment.”

Gains were limited as reports showed U.S. existing home sales unexpectedly fell and manufacturing in the Philadelphia region contracted for a third month, weakening the earnings outlook for exporters.

Japan’s Nikkei 225 Stock Average (NKY) slid 0.6 percent this week and the broader Topix Index lost 1.7 percent. Of the 1,671 companies on the Topix Index, 209 companies are scheduled to report earnings next week, according to data compiled by Bloomberg News.

Kospi Climbs

South Korea’s Kospi Index increased 0.6 percent. Australia’s S&P/ASX 200 Index climbed 2.9 percent, its biggest weekly gain of the year and close to its highest in two months.

Hong Kong’s Hang Seng Index (HSI) gained 2.9 percent, while China’s Shanghai Composite Index slid 0.8 percent.

Shares also rose on easing prospects as swap market indicators suggested China will cut banks’ reserve requirements and encourage corporate lending as the cabinet meets to discuss efforts to revive economic growth.

China has “relatively large” room to boost fiscal spending to support economic growth, Zhang Peng, a Beijing-based researcher at the Ministry of Finance, said July 18 in a telephone interview.

Infrastructure-related stocks surged. China Railway, the country’s biggest rail builder by market value, jumped 6.2 percent to HK$6.98.

Miners Advance

Metals producers advanced after the Thomson Reuters/Jefferies CRB Index of raw materials climbed 3.8 percent this week. Jiangxi Copper Co. (358), the nation’s biggest producer of the industrial metal, climbed 1.6 percent to HK$17.48. BHP Billiton gained 2.9 percent to A$31.36 after reporting a 15 percent gain in iron ore production.

Gauges of stock volatility fell this week. The HSI Volatility Index (VHSI) retreated 3.8 percent to 18.75, indicating traders expect a swing of about 5.3 percent on the benchmark gauge over the next 30 days.

Money managers remained “significantly” underweight equities and overweight cash in July amid concern of a slowdown in global growth, according to a Bank of America Corp. survey July 17 of asset managers who oversee a total of $567 billion for clients. An underweight recommendation advises holding fewer shares than are represented in benchmark indexes.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, advanced 8.2 percent to A$32.79 after raising its output forecast as much as 14 percent, citing a stronger-than- expected start at its A$15 billion ($15.6 billion) Pluto natural gas project.

ZTE Plunges

ZTE slumped 16 percent to HK$10.50 after the company said first-half profit may have declined as much as 80 percent.

Whitehaven Coal Ltd. (WHC) soared 17 percent to A$4.05 in Sydney after Australian mining magnate Nathan Tinkler offered to buy out the rest of the coal producer. A group led by Tinkler, Whitehaven’s biggest shareholder, offered to buy the balance with a conditional cash bid of A$5.20 a share, the Sydney-based company said in a July 13 statement after the market closed.

To contact the reporter on this story: 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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