Asian stocks rise on brokerage upgrades

Asian stocks climbed, lifting the MSCI Asia Pacific Index for an 11th day, as brokerages upgraded banks and steelmakers ahead of earnings announcements.

Sumitomo Mitsui Financial Group Inc., Japan’s third-largest lender, rose 3.4 percent as Nomura Holdings Inc. recommended investors buy the shares. JFE Holdings Inc., Japan’s No. 2 steelmaker, added 3.3 percent after Goldman Sachs Group Inc. said earnings are set to improve from this quarter. James Hardie Industries NV, the biggest seller of home siding in the U.S., climbed 3.6 percent in Sydney after new-home purchases in America surged the most in eight years.

“Investors have been taking comfort that the reporting season hasn’t been horrific,” said Chris Hall, who helps manage $2.6 billion at Argo Investments Ltd. in Adelaide. “The market’s looking like fair value right now, but definitely not what I’d call cheap.”

The MSCI Asia Pacific Index rose 0.7 percent to 109.78 as of 1:20 p.m. in Tokyo. An acceleration in China’s economic growth and better-than-expected U.S. earnings have helped drive a 12 percent climb in the past 11 days. That’s the longest winning streak since January 2004.

Hong Kong’s Hang Seng Index gained 0.8 percent, while Taiwan’s Taiex Index rose 1.5 percent. Compal Electronics Inc., the world’s No.2 maker of notebook computers, climbed 3.1 percent in Taipei after the Commercial Times said the company will supply laptops to Acer Inc. Tata Motors Ltd.’s U.S.- receipts jumped 3.8 percent yesterday after the Indian company unexpectedly reported a jump in profit.

Fluctuating Stocks

Japan’s Nikkei 225 Stock Average swung between gains and losses and was recently 0.3 percent lower. China’s Shanghai Composite Index fell 0.3 percent, its first drop in a week. Sichuan Expressway Co. slumped 10 percent after tripling in value in its trading debut yesterday.

Futures on the Standard & Poor’s 500 Index slipped 0.3 percent today. The gauge climbed 0.3 percent yesterday as a government report showed sales of new homes jumped 11 percent last month from May, the most in eight years and higher than every economist forecast in a Bloomberg survey.

Sumitomo Mitsui, Japan’s No. 3 listed bank, climbed 3.4 percent to 3,970 yen. The company had its investment rating lifted to “buy” from “neutral” at Nomura with a price estimate of 4,500 yen. Improved capital ratios boost the bank’s growth prospects, Nomura analyst Keisuke Moriyama wrote in a Japanese-language report yesterday.

Mitsubishi UFJ Financial Group Inc., the country’s biggest lender by value, rose 0.7 percent to 557 yen, while smaller rival Mizuho Financial Group Inc. added 0.5 percent to 212 yen. The three banks will report first-quarter earnings this week.

Stimulus Policies

Analysts have boosted estimates since the beginning of April for companies in Asia outside Japan, according to data compiled by Bloomberg. Profit forecasts have actually declined within Japan, the data show.

“Earnings season is kicking into high gear this week, so investors are focusing on the individual winners and losers,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo.

JFE, which is due to release quarterly earnings today, climbed 3.3 percent to 3,420 yen. Sanyo Special Steel Co. jumped 9.4 percent to 383 yen. Goldman lifted shares of both companies to “buy.”

“We believe that the outlook for 2010-11 is beginning to improve markedly from our previous assumptions, based on the coordinated policy response from governments around the globe,” analysts led by Rajeev Das wrote in a report. “We also believe the end of the June quarter marks a trough for the current cycle.”

U.S. Economy

James Hardie climbed 3.6 percent to A$5.19 following the U.S. home sales report. Nissan Motor Co., which gets 34 percent of its sales in North America, gained 1.1 percent to 623 yen.

The MSCI Asia Pacific Index has climbed 55 percent from a more than five-year low on March 9 on speculation stimulus policies worldwide will revive the global economy. Stocks on the gauge are valued at an average 24.5 times estimated net income, the most expensive level since March 31.

U.S. companies including Intel Corp. and Apple Inc. this month reported better-then-expected results. Government figures due July 31 may show that the contraction in the U.S. economy narrowed to a 1.5 percent pace in the second quarter, following a 5.5 percent drop in the first three months of 2009, economists surveyed by Bloomberg News predicted.

Compal, which gets 31 percent of its sales in America, rose 3.1 percent to NT$33.45. Acer will contract out the production of 20 million laptops in the first phase of contracts, and Compal will be the largest supplier, the Commercial Times reported today.

Beating Estimates

Sapporo Holdings Ltd. rose 5.3 percent to 599 yen in Tokyo after the brewer said it will post a smaller-than-expected net loss for the six months ended in June.

Tata Motors’s American depositary receipts climbed 3.8 percent to the equivalent of 506.51 rupees, pointing to a gain for the company’s Indian listing, which closed at 374.10 rupees. The company posted a 58 percent increase in net income for the quarter ended in June as a change in accounting rules and lower commodity prices helped mask a fall in demand.

In Shanghai, Sichuan Expressway, which operates toll roads, sank 10 percent to 9.81 yuan. The stock soared 203 percent in its first day of trading yesterday.

China’s Shanghai Composite Index has climbed 88 percent this year, as government stimulus, record bank lending and an economic rebound spurs demand for equities. Companies in the benchmark are valued at 26 times estimated earnings, up from 11 times in October.

“While it’s obvious that the market is in a bubble, the rally could still go on as the government hasn’t stopped the liquidity,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million. “If a correction starts, that will be powerful.”

Source: Bloomberg