Inside Financial Markets

Asian Stocks Gain as Investors Buy ‘Cheap’ China Shares

asia stock upAsian Stocks Gain as Investors Buy ‘Cheap’ China Shares

Asian stocks rose, reversing earlier declines on the regional benchmark, as investors snapped up shares in China, now at the cheapest valuation of the world’s top 10 stock markets. Commodities companies climbed.

Raw-materials suppliers led gains on the regional equities index, with BHP Billiton Ltd. (BHP), the world’s biggest miner, jumping 2.7 percent in Sydney. Bridgestone Corp. (5108), Japan’s No. 1 tiremaker, advanced 4.9 percent after raising its full-year profit forecast. GCL-Poly Energy Holdings Ltd. fell 2 percent in Hong Kong after the world’s largest producer of polysilicon forecast a wider loss.

The MSCI Asia Pacific Index advanced 0.4 percent to 134.39 as of 10:59 a.m. in Hong Kong as seven of the 10 industry groups on the gauge rose. Almost two stocks climbed for each that dropped. Futures on the Standard & Poor’s 500 Index lost 0.1 percent.

“The rest of the year will be better for the Chinese market because expectations got so low,” Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which oversees about $207 billion, said by telephone. “That’s why we’re still overweight on Chinese equities and valuations are among the cheapest. With expectations so low, it’s quite easy for the market to outperform.”

Hong Kong’s Hang Seng Index (HSI) climbed 1.6 percent. The Hang Seng retreated 3.8 percent this year through last week, the only decline among developed markets tracked by Bloomberg, amid concern China’s growth is slowing and speculation the Federal Reserve will pare bond purchases. Bloomberg.

China Shares

China’s Shanghai Composite Index (SHCOMP) added 1.3 percent, with trading volume 35 percent higher for the time of day than its 30-day average. The index is valued at 8.3 times 12-month projected earnings, compared with the five-year average of 12.7 times, data compiled by Bloomberg shows. That is the lowesat among the world’s 10 leading stock markets. The index slumped 9.6 percent this year through Aug. 9.

Investors are “increasingly willing to acknowledge China stocks’ inexpensive valuations as the country’s macro environment stops deteriorating,” Michael Kurtz, head of global equity strategy at Nomura Holdings Inc., wrote in an e-mail.

Japan’s Topix index added 0.1 percent, swinging between gains and losses. Japan’s economy expanded an annualized 2.6 percent in the second quarter, slowing from a revised 3.8 percent in the previous three months. The median forecast of economists surveyed by Bloomberg New was for 3.6 percent growth.

South Korea’s Kospi index advanced 0.3 percent and Australia’s S&P/ASX 200 Index climbed 0.7 percent. New Zealand’s NZX 50 Index fell 0.4 percent. Singapore’s Straits Times Index gained 0.4 percent and Taiwan’s Taiex Index advanced 0.5 percent.

Weekly Loss

The MSCI Asia Pacific last week declined 1.3 percent, snapping the longest streak of weekly gains since January. About 50 percent of member companies that have posted profits this earnings season beat analysts’ estimates, data compiled by Bloomberg show.

That left the benchmark regional equities gauge trading at 12.9 times estimated earnings through the end of last week, compared with 15.3 for the Standard & Poor’s 500 Index (SPX) and 13.9 times for the Stoxx Europe 600 Index.

Japan’s top-listed companies doubled earnings last quarter from a year earlier, with profit rising 103 percent and beating analysts’ estimates by 16 percent, the most in two years, data compiled by Bloomberg show. Companies topping estimates range from Toyota and Sony Corp. to Shiseido Co. and Kobe Steel Ltd.

Best Performer

Even after falling for the past three months, the Topix index is still up 33 percent this year through the end of last week, retaining Japan’s position as the world’s best-performing developed equity market. The measure has risen amid optimism Prime Minister Shinzo Abe will push through reforms while the Bank of Japan provides record stimulus in a bid to ignite a recovery in Asia’s second-largest economy.

Raw-material and energy shares paced gains across the Asia-Pacific region. BHP Billiton added 2.7 percent to A$36.90 and Rio Tinto Group rose 2.8 percent to A$61.92 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, jumped 6.4 percent to HK$15.12 in Hong Kong.

Bridgestone gained 4.9 percent to 3,515 yen in Tokyo. The tiremaker raised its net income forecast for the full year to 246 billion yen ($2.5 billion) from 235 billion.

GCL-Poly Energy fell 2 percent to HK$2.01 in Hong Kong after forecasting a wider loss for the first half, citing a drop in polysilicon wafer prices.


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)