Inside Financial Markets

Asian Stocks Gain as China Growth Data Matches Forecasts

us stocksAsian Stocks Gain as China Growth Data Matches Forecasts

Asian stocks rose, with a regional equities gauge climbing for the fourth time in five days, 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 2.4 percent in Hong Kong. BYD Co., an electric-car maker partly owned by Warren Buffett, jumped 11 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, posted a record slump in Sydney after saying it would write off A$160 million ($145 million).

The MSCI Asia Pacific excluding Japan Index rose 0.2 percent to 439.8 as of 6:33 p.m. in Hong Kong as about three shares gained for every two that fell. 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

Futures on the Standard & Poor’s 500 Index (SPX) added 0.1 percent. The S&P 500 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.

South Korea’s Kospi index rose 0.3 percent and Australia’s S&P/ASX 200 Index gained 0.2 percent. New Zealand’s NZX 50 Index increased 0.8 percent and Singapore’s Straits Times Index was little changed. Taiwan’s Taiex Index added 0.4 percent.

Hong Kong’s Hang Seng Index advanced 0.1 percent, with trading volume 46 percent below the 30-day average. Tencent Holdings Ltd., operator of China’s No. 1 mobile messaging application, jumped to a record as the State Council pledged to upgrade Internet and telecommunications infrastructure.

The Shanghai Composite Index (SHCOMP) gained 1 percent. Citic Securities Co. and Haitong Securities Co., the nation’s biggest securities firms, both rose 4 percent after the government almost doubled investment quotas for foreign investors to buy equities and bonds.

China Growth

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. The MSCI Asia Pacific Index, which includes Japanese companies, capped a third straight weekly gain, the longest streak since March.

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 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.

Foreigners Miss

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.

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 third-largest gain among 10 industry groups on the MSCI Asia Pacific excluding Japan Index, gaining 0.4 percent.

Jiangxi Copper climbed 2.4 percent to HK$12.84 in Hong Kong. Zijin Mining Group Co. (2899), China’s biggest gold producer, added 2.6 percent to HK$1.61. Nan Ya Plastics Corp. increased 3.2 percent to NT$64 in Taipei.

Electric Cars

Consumer-discretionary companies posted the largest gains on the regional gauge. BYD surged 11 percent to HK$31.95. 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.

Tencent, the best-performing stock on the Hang Seng Index this year, surged 3.7 percent to HK$321.40. Private investment in the telecommunications industry will be encouraged and the construction and upgrading of Internet and communications infrastructure will be accelerated, according to a July 12 statement on the central government website.

Kangwon Land Inc. (035250), a South Korean casino operator, slumped 8 percent to 29,200 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 1.1 percent to 28,100 won in Seoul as analysts at Samsung Securities downgraded its recommendation on Korean technology shares.

Treasury Wines sank 12 percent to A$5.11, 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.


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)