Asia Stocks Ex-Japan Track U.S. Rally as China GDP Tops Estimate

Jul 17, 2017 5:20 am ET

(Bloomberg) -- Asian equities ex-Japan rose to their highest in two years as better-than expected economic data in China and receding bets on rate hike by U.S. boosted the growth outlook for the region. China small-cap shares fell amid regulatory concerns.

The MSCI Asia Pacific Index ex-Japan rose for a sixth straight session, adding 0.3 percent to 519.85 as of 4:30 p.m. in Hong Kong, set for its longest winning streak since March. Eight out of 10 industry groups gained, led by material stocks. In China, small-cap shares tumbled, pulling the benchmark stock index lower, amid concerns about tougher regulations. Japan is closed for a public holiday.

"It’s a positive signal that China’s economic growth has not only bottomed but momentum is picking up," Margaret Yang, a strategist at CMC Markets in Singapore said by phone. China’s growth is a “leading power” to Asian countries which can mean more spending and consumption from Asia’s biggest economy, she said.

The MSCI Asia Pacific Index also climbed for a sixth day, hitting a nine-year high two days in a row. The benchmark rallied late Friday on optimism interest rates will stay lower for longer after June inflation and retail sales missed expectations.“With Yellen emphasizing that rate direction is on price inflation performance, markets are expecting an extension to the more accommodative environment after the inflation data,” said Jingyi Pan, market strategist at IG Asia Pte Ltd.

The ChiNext gauge of mostly technology companies sank 5.1 percent at the close to 1,656.43, pulling the Shanghai Composite Index down 1.4 percent, the most since December. Gross domestic product increased 6.9 percent in the second quarter from a year earlier, compared with a 6.8 percent median estimate in a Bloomberg survey.

Asian equities are likely to see "modest rally" over the next 12 months due to supportive regional economic landscape and reasonable valuations, Tuan Huynh, chief investment officer for Asia Pacific at Deutsche bank AG’s wealth division in Singapore, wrote in a report.

See also: Asian Stocks to Continue Rally on Rate Optimism: Street Wrap

Summary

  • Hang Seng Index +0.3%, Hang Seng China Enterprises Index +0.5%, Shanghai Composite Index -1.4%, Taiex +0.1%
    • China Small-Cap Shares Sink to 2015 Low Amid Regulatory Concern
  • Australia’s S&P/ASX 200 Index -0.2%, New Zealand’s NZX 50 +0.7%
    • KKR-Led Bargain Hunt Signals Revival for Australian Telco Stocks
    • Sell Medibank as Fewer Aussies Buy Private Insurance: Goldman
  • Kospi index +0.4%, Kospi 200 Index +0.4%; both rise to fresh record high
  • Straits Times Index +0.2%, FTSE Bursa Malaysia KLCI Index little changed, Philippine Stock Exchange PSEi Index +0.6%, SET Index -0.1%
    • ‘Undervalued’ Singapore Set to Gain From GLP Sale: Street Wrap
      Philippine Stock Races to Top as Mighty Rival Sells Out: Chart
  • Sensex Index +0.3%, Nifty 50 Index +0.3%
    • India’s Sensex Climbs to a Fresh Record as Wipro, Infosys Rise
    • Dual-Listed Stocks an Accidental Insurance for India’s Glitches

(Updates index and share price movements after most Asian markets close.)

--With assistance from Choong En Han

©2017 Bloomberg L.P.