Asian Stocks Near Six-Year High After China Manufacturing Report

Jul 24, 2014 10:11 am ET

July 24 (Bloomberg) -- Asian stocks were little changed, with the regional benchmark index near a six-year high, after a Chinese manufacturing gauge rose to an 18-month high.

LG Display Co. climbed 1.4 percent in Seoul after the supplier of panels for Apple Inc. devices posted second-quarter profit that beat analyst estimates. Great Wall Motor Co. jumped 7.4 percent in Hong Kong as China International Capital Corp. recommended the shares after the auto-maker posted preliminary results. Newcrest Mining Ltd. sank 6.2 percent as Australia’s biggest gold producer said it may write down the value of its assets by as much as A$2.5 billion ($2.4 billion).

The MSCI Asia Pacific Index slipped less than 0.1 percent to 148.43 as of 10:07 p.m. in Hong Kong, after falling as much as 0.2 percent. The gauge yesterday closed at the highest level since June 2008. Companies from PepsiCo Inc. to Dow Chemical Co. helped drive the Standard & Poor’s 500 Index to a record close yesterday, with about 77 percent of index members posting results this season that exceeded analysts’ estimates.

“Against the backdrop of improving earnings and benign U.S. inflation, the market can continue to grind higher,” Tim Schroeders, a portfolio manager who helps oversee $1 billion on in equities at Pengana Capital Ltd. in Melbourne, said by phone. “Investors are a bit more positive on China as some of the doomsday scenario previously feared have dissipated.”

China PMI

A Chinese manufacturing gauge rose to an 18-month high in July, adding to signs that the government will meet its 2014 economic-growth target of about 7.5 percent. A preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 52, compared with the 51 median estimate of analysts surveyed by Bloomberg News and a final reading of 50.7 in June. Numbers above 50 indicate expansion.

China’s Shanghai Composite Index jumped 1.3 percent. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong advanced 1.1 percent, while the city’s benchmark Hang Seng Index added 0.7 percent, its highest close since April 2011. Singapore’s Straits Times Index rose 0.2 percent and Taiwan’s Taiex gained 0.3 percent.

New Zealand’s NZX 50 Index climbed 0.6 percent after the central bank raised its benchmark interest rate and signaled it will now pause increases amid benign inflation. Australia’s S&P/ASX 200 Index added 0.2 percent.

Japan Trade

Japan’s Topix index fell 0.2 percent. The country’s trade deficit was larger than economists forecast after exports unexpectedly fell. The shortfall in June was 822.2 billion yen ($8.1 billion), the finance ministry reported in Tokyo today, surpassing the 643 billion yen median estimate in a Bloomberg News survey of 32 economists. Exports shrank 2 percent from a year earlier, while imports rose 8.4 percent.

South Korea’s Kospi index slipped 0.1 percent. The government unveiled 11.7 trillion won ($11.4 billion) of measures to shore up Asia’s fourth-largest economy after growth slumped to the weakest pace in more than a year in the second quarter. The finance ministry cut its 2014 growth estimate to 3.7 percent from 3.9 percent.

The MSCI Asia Pacific Index traded at 13.6 times estimated earnings yesterday compared with 16.7 for the S&P 500 Index, according to data compiled by Bloomberg.

The S&P 500 gained 0.2 percent yesterday to an all-time high as Apple Inc. boosted technology companies and health-care shares rallied amid earnings. Facebook Inc. surged in extended trading past its all-time high after posting second-quarter revenue and profit that beat analyst estimates.

U.S. Rates

The S&P 500 headed for a second week of advance as inflation data signaled the Federal Reserve won’t be compelled to raise interest rates in the near future and earnings reports boosted optimism about the economy. Fed Chair Janet Yellen has said rates will stay low for a “considerable time” after the central bank stops its monthly bond purchases. It is on track to end them in October.

The Fed may have scope to keep interest rates at zero for longer than investors anticipate as inflation stays muted and a 2014 slowdown prolongs the labor-market recovery, the International Monetary Fund said yesterday.

LG Display gained 1.4 percent to 33,150 won in Seoul after saying second-quarter net income more than doubled to 258.3 billion won, beating analyst estimates of 124.6 billion won.

Great Wall Motor jumped 7.4 percent to HK$32.50. CICC raised its rating on the stock to buy from hold, while Barclays Plc said the company’s operating profit margins held up better than expected in the first half.

Chinese Developers

Chinese real estate companies rallied in Hong Kong after China Central Television reported on its microblog that the southwestern city of Chengdu has eased home-purchase restrictions, citing unidentified developers. Country Garden Holdings Co., the homebuilder controlled by billionaire Yang Huiyan, jumped 7.4 percent to HK$3.77. Agile Property Holdings Ltd. climbed 5.6 percent to HK$6.37.

Fujifilm Holdings Corp. rose 2 percent to 2,968 yen in Tokyo after the Nikkei newspaper reported that sales of high-end cameras boosted the company’s first-quarter operating profit to almost 30 billion yen.

Among shares that fell, TransAsia Airways Corp. tumbled 5.5 percent to NT$11.25 in Taipei after one of its passenger planes crashed as as it prepared to land on Taiwan’s outlying Penghu Islands, killing 48 people and injuring 10.

Newcrest sank 6.2 percent to A$10.78 in Sydney. The company said it would writedown A$2.5 billion of assets, mainly for its Lihir mine in Papua New Guinea. That follows a $5.7 billion writedown in 2013 that triggered a record loss, a regulatory inquiry and a boardroom clean-out.