Asian Stocks Advance as Bank of Japan Meeting Starts

Asian Stocks Advance as Bank of Japan Meeting Starts

Bloomberg – Asian stocks rose, with the regional gauge heading for the highest level in three weeks, as Aeon Co. reported a surge in profit. Stocks pared gains after Chinese exports unexpectedly fell in June.

Aeon, Japan’s largest retailer, jumped 2.1 percent in Tokyo after reporting a 9.8 percent increase in first-quarter operating profit. Chow Tai Fook Jewellery Group Ltd., the world’s biggest jewelery chain, headed for its biggest advance in eight months in Hong Kong after same-store sales jumped on gold demand. CSL Ltd., an Australian maker of blood-derived therapies, rose 2.2 percent as Bank of America Corp. advised buying the shares.

The MSCI Asia Pacific Index added 0.5 percent to 132.07 as of 11:33 a.m. in Hong Kong, as the Bank of Japan begins a two-day policy meeting. Nine of 10 industry groups advanced, with about five shares advancing for every three that fell. The gauge pared earlier gains of as much as 0.8 percent after data showed China recorded its biggest drop in exports since 2009.

“I don’t think China is a house of cards that’s about to fall, but it is something that needs to be focused on,” said Tim Schroeders at Pengana Capital. “It’s a risk for investors in terms of how it’s managed from here on in. We expect more policy response and greater detail about how they are going to put their stamp on policy in the second half of this year. Growth is at lower levels than what we’ve seen in the past 10 years.”

The MSCI Asia Pacific index fell 9 percent through yesterday from a five-year high on May 20 amid concern the U.S. Federal Reserve will begin tapering stimulus as China’s economy slows and Japan puts off unveiling economic reform policies until after upper house elections later this month.

Relative Value

That left the gauge trading at 12.9 times average estimated earnings compared with 15 for the Standard & Poor’s 500 Index and 13.1 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Japan’s Topix index climbed 0.4 percent, extending its advance from a two-month low in June to 15 percent and heading for the highest closing level since May 22. The gauge last week capped its biggest increase across three weeks since April 2009, amid a weakening yen and optimism Prime Minister Shinzo Abe will push through economic reforms after winning upper house elections on July 21.

Thirteen of 20 economists in a Bloomberg News survey completed July 8 saw no extra BOJ policy loosening in the next six months, a reversal from a poll in May. The central bank’s board will leave the scale of its bond purchases unchanged at the two-day meeting starting today, according to every economist polled in the latest survey.

BOJ Stimulus

“The BOJ has got scope, given the context of policy adjustments that they’ve announced, to do something further,” said Pengana’s Tim Schroeders. “A lot of the stimulus that has been put in place over the last six to twelve months is yet to bite. We’re yet to see confirmation across the broader economy that things are working.”

Australia’s S&P/ASX 200 Index climbed 0.6 percent and New Zealand’s NZX 50 Index rose 0.4 percent, while South Korea’s Kospi index slid 0.1 percent. Hong Kong’s Hang Seng Index gained 0.5 percent and the Shanghai Composite added 0.4 percent.

Chinese exports unexpectedly dropped 3.1 percent in June, missing the median estimate of 39 economists surveyed by Bloomberg News who forecast a 3.7 percent gain from a year earlier. The U.S. and China start two days of strategic and economic talks today in Washington.

Global Growth

World economic growth will struggle to accelerate this year as a U.S. expansion weakens, China’s economy levels off and Europe’s recession deepens, the International Monetary Fund said. Global growth will be 3.1 percent this year, unchanged from the 2012 rate, and less than the 3.3 percent forecast in April, the Washington-based fund said yesterday, trimming its prediction for this year a fifth consecutive time.

Futures on the Standard & Poor’s 500 Index slipped 0.1 percent today. U.S. stocks yesterday rose for a fourth day amid optimism companies will report better-than-forecast earnings and that economic growth is strong enough to withstand any reduction in Federal Reserve stimulus.

Minutes of the Federal Open Market Committee’s June 18-19 meeting will be released today and Fed Chairman Ben S. Bernanke will speak at a National Bureau of Economic Research conference.

Aeon gained 2.1 percent to 1,408 yen in Tokyo after its profit report, leading Bank of America analyst Hidehiko Aoki to increase his price estimate on the shares by 8.7 percent to 1,500 yen.

Chow Tai Fook Jewellery surged 9.4 percent to HK$8.87 in Hong Kong as the jewelery chain posted a 48 percent gain in same-store sales for the first quarter.

CSL climbed 2.2 percent to A$66.05 in Sydney, a second day of gains. The company will announce another share buyback of at least A$900 million ($824 million) at its full-year earnings release in August, Bank of America analyst Matthew Prior wrote in a report, upgrading the shares to buy from neutral.