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Asian Stocks Outside Japan Climb After Last Week’s Drop

By Yoshiaki Nohara
August 04, 2014 5:04 AM EDT 4 Comments

Asian stocks outside of Japan rose, with a gauge of regional equities rebounding after last week’s decline, as information technology companies advanced.

Compal Electronics Inc. (2324) jumped 6.9 percent after Macquarie Group Ltd. said earnings for the Taiwanese computer maker will improve. China Everbright Ltd. soared 15 percent in Hong Kong on government plans to revamp the ownership of parent China Everbright Group Ltd. Horizon Oil Ltd. slumped 6.8 percent on speculation Roc Oil Co. may end plans to combine with the Australian oil explorer.

The MSCI Asia Pacific Excluding Japan Index gained 0.4 percent to 505.85 as of 4:45 p.m. in Hong Kong, after falling 0.1 percent earlier. The measure declined 1.1 percent on Aug. 1, dragging the gauge to its first weekly drop in three weeks. The MSCI Asia Pacific Index, which includes Japan, was little changed at 147.76.

“We’re going to see an acceleration in economic growth for many parts of the world, including Asia,” Mark Matthews, head of Asia research for Bank Julius Baer & Co., which oversees about $377 billion, said on Bloomberg Television. “I still think it’s onwards and upwards for the markets. The Chinese economy is showing modest improvements. The worst is behind us in terms of the bad news from China.”

A report last week showed China’s manufacturing expanded in July at the fastest pace in more than two years, signaling a pickup in economic growth is strengthening amid government support policies.

China Rally

China’s Shanghai Composite Index (SHCOMP) jumped 1.7 percent to the highest close since Dec. 10. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong advanced 1 percent, while the city’s benchmark Hang Seng Index added 0.3 percent. India’s S&P BSE Sensex Index and South Korea’s Kospi index both rose 0.4 percent. Taiwan’s Taiex Index added 0.7 percent.

Japan’s Topix (TPX) index and New Zealand’s NZX 50 Index both lost 0.4 percent. Australia’s S&P/ASX 200 Index slipped 0.3 percent, while Singapore’s Straits Times Index declined 0.9 percent.

“The market is increasingly poised to get a correction,” said Koichi Kurose, Tokyo-based chief market strategist at Resona Bank Ltd. “It’s hard for investors to interpret the implications of European bailouts, and so the Asian market tends to go down with the U.S. market. The U.S. jobs data haven’t changed much, meaning that its economy isn’t picking up fast.”

Bank Bailout

Portugal’s central bank took control of Banco Espirito Santo SA in a 4.9 billion-euro ($6.6 billion) bailout that will leave junior bondholders with losses. Banco Espirito Santo has been forced to take government money after regulators uncovered potential losses on loans to other companies tied to Portugal’s Espirito Santo family and ordered the lender to raise capital. Bank of Portugal Governor Carlos Costa had sought to find private investors to inject the cash, and said government funds would only be used as a last resort.

Compal Electronics climbed 6.9 percent to NT$29.40. Macquarie maintained its outperform rating and raised its shares-price forecast to NT$31.5 from NT$26.5, saying market-share gains will boost earnings this year.

China Everbright Ltd. jumped 15 percent to HK$13.54 in Hong Kong, its biggest advance since October 2008, on its parent’s plans for an ownership revamp of a group with $420 billion of assets from banking and broking to tourism.

Brokerages Climb

Shares of Chinese brokerages jumped after a report that the government plans to relax some risk-management requirements on securities companies, a move that could free up capital for expansion. Citic Securities Co., China’s largest by assets, rose 6.9 percent to HK$20.25 in Hong Kong. Haitong Securities Co. gained 5.7 percent to HK$13.28.

Futures on the Standard & Poor’s 500 Index added 0.2 percent today. The measure slid 0.3 percent on Aug. 1 as investors weighed concerns over Argentina and Portugal against jobs data that signaled the Federal Reserve may have leeway to keep interest rates low.

Data last week showed U.S. employers added more than 200,000 jobs for a sixth straight month in July, the longest such period of gains since 1997. The 209,000 advance fell short of the 230,000 increase forecast by economists. The jobless rate climbed to 6.2 percent from 6.1 percent in June as more people entered the labor force.

Horizon Oil declined 6.8 percent to 34.5 Australian cents. Roc Oil will likely terminate its merger agreement with Horizon after Roc’s board unanimously recommended a rival takeover offer from Fosun International Ltd., Horizon said. Fosun, which agreed to buy Roc for A$474 million ($441 million) in cash, added 0.7 percent to HK$9.63 in Hong Kong.

China Policy

The People’s Bank of China warned that the country’s credit and money supply have increased rapidly and indicated that it will refrain from broader monetary easing to support growth.

“The total debt level has been rising relatively quickly,” the PBOC said in its second-quarter monetary policy report on Aug. 1. “Our existing money supply and credit are already relatively large and their growth is also high.”

A Chinese services industry index declined to a six-month low in July, dragged down by a weaker property market. The non-manufacturing Purchasing Managers’ Index fell to 54.2 from 55 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. A reading above 50 indicates expansion.

Of the companies on the MSCI Asia Pacific Index that posted results since the beginning of July through last week and for which Bloomberg had estimates, 60 percent beat earnings expectations.

The Asia-Pacific gauge traded at 13.6 times estimated earnings on Aug. 1 compared with 16.1 for the S&P 500 and 15.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Tom Redmond

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