Bloomberg News

Asian Stocks Post 10th Advance in 11 Weeks on Earnings

July 25, 2014

Asian stocks rose, with the regional benchmark index posting its 10th advance in 11 weeks, as earnings from companies including Fanuc Corp. boosted sentiment.

Fanuc jumped 5.3 percent after the Japanese maker of industrial robots reported quarterly profit that beat analyst estimates. Itochu Corp. rose 2.5 percent after Japan’s third-largest trading company announced a share buyback. Treasury Wine Estates (TWE) Ltd., owner of the Penfolds label, slipped 1.8 percent in Sydney after Credit Suisse Group AG said a proposed transaction with KKR & Co. is unlikely.

The MSCI Asia Pacific Index gained 0.2 percent to 148.71 as of 6:44 p.m. in Hong Kong. The measure posted its highest close since June 2008 and a 1.3 percent advance this week. The Standard & Poor’s 500 Index closed at a record yesterday as a raft of better-than-estimated earnings in the U.S. and signs of global manufacturing growth buoyed sentiment.

“While valuations aren’t stretched, there will be limitations as to how far this rally can go,” said Matthew Sherwood, head of investment markets research at Perpetual Ltd. in Sydney, which manages about $29 billion. “Whenever a downward draft comes into the market, it’s likely to prove short-lived on the back of continued monetary support, valuations and an improving growth environment.”

Japan’s Topix index climbed 0.9 percent. The nation’s consumer prices excluding fresh food rose 3.3 percent from a year earlier after a 3.4 percent gain in May, the statistics bureau said today in Tokyo. The increase matched the projection in a Bloomberg News survey of 32 economists.

Mobius Bullish

China’s Shanghai Composite Index rose 1 percent to the highest close since April 14. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong, also known as the H-share index, increased 0.5 percent, while the city’s benchmark Hang Seng Index added 0.3 percent.

The H-share index may climb another 20 percent, Mark Mobius, the executive chairman of Templeton Emerging Markets Group, said yesterday. Mobius, whose $12 billion Templeton Asian Growth Fund has outperformed 94 percent of peers this year, favors state-owned banks and energy companies because of their cheap valuations and the government’s plans to open up state-dominated industries.

South Korea’s Kospi index and New Zealand’s NZX 50 Index each advanced 0.4 percent. Australia’s S&P/ASX 200 Index lost 0.1 percent. Singapore’s Straits Times Index slipped 0.1 percent, while Taiwan’s Taiex index dropped 0.9 percent. India’s S&P BSE Sensex Index lost 0.6 percent.

IMF Forecast

The International Monetary Fund lowered its outlook for global growth this year as expansions weaken from China to the U.S. and military conflicts raise the risk of a surge in oil prices. The world economy will advance 3.4 percent in 2014, the IMF said, less than its 3.6 percent prediction in April and stronger than last year’s 3.2 percent. Growth next year will be 4 percent, compared with an April forecast for 3.9 percent, the fund said.

China’s economy is seen expanding 7.4 percent this year, less than the 7.5 percent forecast in April, the IMF said. Next year, growth in the world’s second-largest economy with slow to 7.1 percent, the Washington-based fund said, less than its forecast in April for 7.3 percent.

The IMF report reflected a world rattled by geopolitical risks that have risen since April, including the potential for “sharply higher oil prices” because of recent Middle East unrest.

Relative Value

The MSCI Asia Pacific Index (MXAP) traded at 13.6 times estimated earnings compared with 16.6 for the S&P 500, according to data compiled by Bloomberg.

Futures on the S&P 500 were little changed today. The U.S. equity benchmark index gained 0.1 percent yesterday to a record as Facebook Inc. rallied on higher revenue and growth in global manufacturing offset a drop in home sales.

Fanuc advanced 5.3 percent to 18,390 yen in Tokyo after posting a 99 percent gain in first-quarter net income to 45.2 billion yen ($444 million), beating analyst estimates for 41.3 billion yen.

Of the companies that reported quarterly earnings since the beginning of the month and for which estimates are available, 58 percent have exceeded expectations, according to data compiled by Bloomberg.

Kia Motors Corp. gained 1.6 percent to 56,800 won in Seoul after South Korea’s second-largest carmaker reported second-quarter profit that beat analyst estimates.

Itochu, Advantest

Itochu added 2.5 percent to 1,348 yen after saying it will spend as much as 110 billion yen to buy back shares. Japan’s third-largest trading company also agreed a business tie-up with Thai agriculture group Charoen Pokphand to expand food supply in the world’s most populous region.

Among shares that fell, Advantest Corp. (6857), a maker of chip-testing equipment, plunged 6.7 percent to 1,151 yen after posting profit that missed estimates.

Treasury Wine Estates slipped 1.8 percent to A$4.99. Credit Suisse lowered its share-price forecast by 33 percent to A$3.15 and reiterated its underperform rating, saying a deal with KKR is unlikely.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net John McCluskey


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