Inside Financial Markets

Asian Stocks Gain After China Growth Data Matches Forecasts

asian markets fallAsian Stocks Gain After China Growth Data Matches Forecasts

Asian stocks rose, with a regional equities gauge heading for the highest close in a month, after a report showed China’s economy grew 7.5 percent in the second quarter, matching economists’ estimates.

Jiangxi Copper Co. (358), China’s No.1 producer of the metal, advanced 2.2 percent in Hong Kong. BYD Co., an electric-car maker partly owned by Warren Buffett, jumped 7.1 percent in Hong Kong after China’s State Council was reported to endorse the use of new energy in government vehicles. Treasury Wine Estates Ltd. (TWE), the world’s second-biggest listed winemaker by revenue, headed for a record slump in Sydney after saying it would write off A$160 million ($145 million).

The MSCI Asia Pacific excluding Japan Index rose 0.4 percent to 440.68 as of 11:17 a.m. in Hong Kong as about three shares gained for every two that fell. A close at this level would be the highest since June 17. Futures on the Standard & Poor’s 500 Index (SPX) added 0.3 percent. Japanese equity markets are closed for a holiday.

“They are going to engineer a soft landing in China,” Nick Maroutsos, managing director and co-founder of Kapstream Capital, which oversees more than $4.5 billion, said in an interview in Sydney. “We’re advising investors to stay relatively nimble. We’re still very positive on the Asian region.”

The MSCI Asia Pacific excluding Japan Index declined 5.8 percent this year through last week as China’s money-market rates surged to a record and after Federal Reserve Chairman Ben S. Bernanke said policy makers may start reducing stimulus if the U.S. economy shows sustained improvement.

Regional Gauges

South Korea’s Kospi index and Australia’s S&P/ASX 200 Index both gained 0.2 percent. New Zealand’s NZX 50 Index increased 0.5 percent and Singapore’s Straits Times Index rose 0.3 percent. Taiwan’s Taiex Index added 0.2 percent.

Hong Kong’s Hang Seng Index advanced 0.4 percent, with trading volume 42 percent below the 30-day average for the time of day. The Shanghai Composite Index (SHCOMP) gained 1.2 percent, led by Citic Securities Co. and Haitong Securities Co., the nation’s biggest securities firms, after the government almost doubled investment quotas for foreign investors to buy equities and bonds.

The MSCI Asia Pacific excluding Japan Index gained 2.8 percent last week, leaving the gauge trading at 11.9 times average estimated earnings compared with 15.2 for the Standard & Poor’s 500 Index and 13.2 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China Growth

China’s economy, the world’s second-largest, expanded 7.5 percent in the three months to June 30, matching the median forecast of 45 economists surveyed by Bloomberg.

“You should be used to this sort of data,” Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd. that manages about $1 billion, said by telephone. “It’s well and truly priced in to the market. It’s safer to buy the dips than it has been for a good while.”

The Shanghai Composite Index of mainland-listed companies dropped 10 percent this year through last week. Stocks retreated amid a surge in money market rates last month that spurred economists at Goldman Sachs Group Inc. and China International Capital Corp. to predict China’s gross domestic product will expand 7.4 percent this year, which would be the weakest annual rate since 1990.

China’s 20-year economic boom has boosted the wealth of its 1.3 billion citizens at the fastest pace worldwide, according to the International Monetary Fund. Foreigners earned less than 1 percent a year investing in Chinese stocks, a sixth of what they would have made owning U.S. Treasury bills.

Credit Curbed

The ruling Communist Party is sacrificing short-term economic growth as it seeks to make the nation’s long-term expansion more sustainable, in part by curbing credit, Gary Dugan, the Singapore-based chief investment officer for Asia and the Middle East at Coutts & Co., said in a July 10 interview.

“With a new plan to rebalance the economy, we’ve got something of a cloud over” stocks, Dugan said.

Raw-material shares posted the largest advance among 10 industry groups on the MSCI Asia Pacific excluding Japan Index, gaining 0.5 percent. Jiangxi Copper climbed 2.2 percent to HK$12.82 in Hong Kong. Rio Tinto Group (RIO), the world’s second-largest mining company, rose 0.3 percent to A$54.90, a fifth day of gains.

BYD surged 7.1 percent to HK$30.85. China’s State Council urged an acceleration of energy-saving measures, China National Radio reported July 12, citing a cabinet meeting chaired by Premier Li Keqiang. The development should be supported by policies and participation of private capital, the report said.

Casino Tax

Kangwon Land Inc. (035250), a South Korean casino operator, slumped 8.2 percent to 29,150 won as the Maeil Business newspaper reported the government is seeking to levy a tax on casinos.

LG Display Co. (034220), the No. 2 maker of flat-panel displays, dropped 1.8 percent to 27,900 won in Seoul as analysts at Samsung Securities downgraded its recommendation on Korean technology shares.

Treasury Wines sank 11 percent to A$5.19, on course for a record one-day decline. A A$160 million writedown, greater than the company’s expected net income this year, was taken to address excess stock in the U.S., Treasury Wine’s largest division by sales, the Melbourne-based company said in a statement.

The S&P 500 Index climbed 0.3 percent to close at a record 1,680.19 in New York on July 12. Financial stocks rose the most of the 10 industry groups on the S&P 500 after Wells Fargo & Co. reported earnings that topped analysts’ estimates.


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)