Asian Stocks Extend Six-Year High as H-Shares Enter Bull Market

Jul 28, 2014 7:28 am ET

July 28 (Bloomberg) -- Asian stocks rose, with the regional benchmark index extending a six-year high, as Chinese shares trading in Hong Kong entered a bull market amid optimism government stimulus is boosting economic growth.

Bank of Communications Co. soared 6.2 percent in Hong Kong on a report the lender wants to sell more stakes to private investors. Resona Holdings Inc. jumped 5.4 percent after the Japanese bank said it would buy back preferred shares to repay public funds. Hitachi Chemical Co. soared 9.5 percent in Tokyo after announcing job cuts and reporting a quarterly profit.

The MSCI Asia Pacific Index gained 0.2 percent to 149.11 at 7:09 p.m. in Hong Kong. The benchmark closed on July 25 at its highest level since June 2008, gaining 1.4 percent during the week. The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong rose 20 percent from a March 20 low after policy makers deployed targeted stimulus to meet growth targets.

“Asia still has more consistent momentum than developed markets,” said Khiem Do, Hong Kong-based head of Asian multi- asset strategy at Baring Asset Management Ltd., which oversees about $60 billion. The effect of China’s stimulus measures “has been recognized by China, Asian and emerging markets and that’s why we’ve had quite a strong rally.”

The Hang Seng China Enterprises Index advanced 0.7 percent today in Hong Kong, while the city’s benchmark Hang Seng Index added 0.9 percent. The Shanghai Composite Index gained 2.4 percent.

Stimulus Measures

China has cut reserve requirements for some banks, accelerated infrastructure spending and loosened property curbs as Premier Li Keqiang seeks to keep growth from falling below his 7.5 percent target.

Profit at industrial companies in China increased 17.9 percent in June from a year earlier, after gaining 8.9 percent in May, data from China’s statistics bureau yesterday showed. It was the biggest advance since an 18.4 percent jump in September and came after a private gauge of Chinese manufacturing last week rose to an 18-month high.

Japan’s Topix index climbed 0.4 percent and South Korea’s Kospi index added 0.7 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index both slipped 0.1 percent. Taiwan’s Taiex fell 0.2 percent. India’s S&P BSE Sensex slid 0.5 percent. Singapore’s market was closed today.

Relative Value

Of the companies on the MSCI Asia Pacific Index that have posted results since the beginning of July and for which Bloomberg has estimates, 56 percent beat earnings expectations.

The Federal Reserve meets July 29-30 to review monetary policy before monthly U.S. payrolls data is released Aug. 1. Employers probably added 231,000 workers to nonfarm payrolls in July, after a 288,000 increase in June, according to economists’ estimates compiled by Bloomberg.

Bank of Communications soared 6.2 percent to HK$5.81 in Hong Kong after Reuters reported that China’s fifth-largest lender has applied to become the first state-controlled bank to pilot so-called hybrid ownership.

Resona advanced 5.4 percent to 609 yen in Tokyo after saying it will buy back and cancel 235 billion yen ($2.3 billion) of preferred shares as part of a plan to repay a government bailout in 2003.

Hitachi Chemical jumped 9.5 percent to 1,860 yen, its biggest rally since March 2011, after saying it plans to cut 1,000 jobs via buyouts and its first-quarter net income was 6.5 billion yen.

Healthscope Ltd. advanced 5.2 percent to A$2.21 on its debut in Sydney trading after the hospital operator and its private equity owners raised A$2.25 billion ($2.1 billion) in an initial public offering.

GCL-Poly Energy Holdings Ltd., a maker of polysilicon used in solar panels, gained 1.2 percent to HK$2.62 in Hong Kong after saying it will return to profit in the first half.

Tokyo Electron Ltd., a Japanese maker of industrial electronics, fell 2.7 percent to 6,613 yen after DealReporter said a filing with China’s Ministry of Commerce for its acquisition by Applied Materials Inc. has been withdrawn.