Bloomberg News

China Stocks Erase Year’s Losses as Yen Drop Drives Japan Shares

December 25, 2012

China Stocks Erase Year’s Losses

An investor monitors stock prices at a securities exchange firm in Shanghai. Photographer: Qilai Shen/Bloomberg

Chinese equities rose, with a benchmark gauge erasing losses this year, amid expectations for a recovery in the world’s second-largest economy. Japanese shares and rubber gained after the yen touched a 20-month low.

The MSCI Asia Pacific Index (MXAP) climbed 0.3 percent as of 10:10 p.m. in Tokyo, while the Shanghai Composite Index (SHCOMP) rose 2.5 percent and Japan’s Nikkei 225 Stock Average added 1.4 percent. The yen rallied 0.2 percent after falling to 84.96 per dollar earlier, the weakest since April 2011. Rubber futures rose 1.6 percent in Tokyo. Most markets in Europe are closed and the U.S. is shut for the Christmas holiday.

China is due to release figures this week on November profit for industrial companies, following a more-than 20 percent earnings surge in October. Japan’s incoming Prime Minister Shinzo Abe agreed with a coalition ally on a policy package that includes “bold monetary easing” to reach 2 percent inflation. Japanese consumer prices excluding fresh food slid last month, economists said before data this week.

“There are growing expectations that new leaders will take measures to reform the economy and the financial system will find China new growth drivers,” said Wang Zheng, the Shanghai- based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “That’s why you see all these big-caps rallying today. The ongoing economic recovery is spurring the rebound as well.”

Almost three stocks rose for every one that fell on MSCI’s Asian gauge, with only energy shares down among the 10 main groups in the measure. Japan’s Topix Index (TPX), the nation’s broadest gauge of stocks, rose 0.6 percent as Japanese markets reopened after a holiday yesterday.

Company Profits

The MSCI Emerging Markets Index (MXEF) added 0.1 percent as Taiwan’s Taiex Index gained 1.3 percent. Asian markets outside of Japan, China, Taiwan, Thailand, Vietnam and Sri Lanka are closed. Russia’s Micex Index (INDEXCF) climbed 0.1 percent, Turkey’s benchmark index increased 0.4 percent, a second day of gains and the highest level since at least January 1988, according to data compiled by Bloomberg.

Property developers led gains on the Shanghai Composite Index, which slipped as much as 11 percent this year. Poly Real Estate Group Co. and China Vanke Co., the biggest Chinese developers (SHPROP), gained more than 4.7 percent after Soufun Holdings Ltd. said it sees improvement in the property market in 2013. Wuliangye Yibin Co. (000858) paced gains for consumer-staples companies after the 21st Century Business Herald reported that the liquor maker may raise prices next year.

The previous corporate earnings report from China showed a 20.5 percent gain in October from a year earlier, turning positive for the year as factory output accelerated and exports picked up following a seven-quarter economic slowdown.

Rate Cut

Israel’s T-25 Index dropped 0.8 percent to 1,181.48. Israel’s benchmark government bonds rose, pushing the yield to a record low, and the shekel weakened after the central bank cut its base lending rate to counter slower economic growth.

The yield on the 5.5 percent government notes due January 2022 dropped four basis point, or 0.04 percentage point, to 3.65 percent by 4:30 p.m. close in Tel Aviv, the lowest since the notes started trading in April 2011. The shekel depreciated 0.1 percent to 3.7471 a dollar.

The Bank of Israel yesterday lowered the lending rate by a quarter-point to 1.75 percent, the lowest in more than two years. Eight of the 23 economists surveyed by Bloomberg had forecast the decision, while 14 predicted no change. One expected a larger half-point reduction. The regulator lowered its 2013 economic growth outlook to 2.8 percent from 3 percent, excluding gas output.

Weak Yen

Japan’s Abe, poised to become prime minister tomorrow after elections earlier this month, said on Fuji Television on Dec. 23 that he will consider revising the law governing the Bank of Japan if the central bank doesn’t increase its inflation target to 2 percent from 1 percent at its January meeting.

“The yen has extended losses on the back of Abe’s comments,” said Toshiyuki Kanayama, a market analyst at Tokyo- based Monex Inc. “Exporters, especially auto and high-tech shares, are going to be bought as investors expect better currency margins.”

The yen rose 0.2 percent to 84.80 a dollar and gained 0.1 percent to 111.82 per euro. Japan’s so-called core inflation rate slid 0.1 percent in November from a year earlier, according to the median estimate of economists in a Bloomberg News survey before the data due on Dec. 28.

Abe’s agreement with coalition ally Natsuo Yamaguchi of the New Komeito Party also calls for a “large” extra budget for the current fiscal year to March 2013 and deregulation of the energy, environment and health care sectors. The parties agreed to seek nominal gross domestic product growth of 3 percent, without giving a time frame for the goal.

“Japan’s Abe means business this time,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in a Twitter posting. “Trillions of yen to be printed. Weak yen, positive inflation.”

Rubber for delivery in June, the most-active by volume, gained as much as 1.7 percent to 292.40 yen a kilogram on the Tokyo Commodity Exchange.

To contact Bloomberg News staff for this story: Chua Baizhen in Singapore at bchua14@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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