Business | Markets
Recovery in Asian stocks gains traction
MSCI Asia Pacific Index makes biggest advance since May, rallying 47% from a five-year low on March 9.
- Bloomberg
- Published: 23:10 July 19, 2009
Singapore: Asian stocks rose last week, giving the MSCI Asia Pacific Index its biggest advance since May, amid renewed confidence the global economy is recovering.
CapitaLand, Singapore's biggest developer, climbed 10 per cent as Singapore upgraded its economic growth forecasts. Alumina, partner in the world's biggest producer of the material used to make aluminium, jumped 15 per cent in Sydney as commodity prices climbed. Bank of Communications Co. gained 8.3 per cent in Hong Kong as economist Nouriel Roubini said the worst of the financial crisis is over.
"The recovery is gaining traction," said Nader Naeimi, a strategist at AMP Capital Investors in Sydney, which manages about $95 billion (Dh349 billion). "Even if we don't see spectacular growth, a stabilisation should be enough to support a market rally."
The MSCI Asia Pacific Index added 2.7 per cent to 103.38 this week. The gauge has rallied 47 per cent from a five-year low on March 9 amid optimism stimulus policies around the world will revive the global economy. The MSCI World Index gained 6.7 per cent last week, the most since March.
Hong Kong's Hang Seng Index climbed 6.2 per cent, while Japan's Nikkei 225 Stock Average rose 1.2 per cent. Indonesia's Jakarta Composite Index fell 0.6 per cent Friday, paring its weekly gain to 2.1 per cent, after bomb blasts killed at least eight people in the city.
The MSCI Asia Pacific Index rose last week as government reports showed economic growth accelerated in China and US manufacturing improved. Intel Corp forecast sales that beat analyst estimates, while International Business Machines Corp. raised its profit forecast.
"Sentiment has been gaining momentum following positive economic and earnings news," said Michiya Tomita, who helps manage $61 billion at Mitsubishi UFJ Asset Management Co in Hong Kong. "Most of the good news has been priced in. Investors will be looking for more catalysts in the next few weeks as companies report earnings."
Stocks on the MSCI Asia Pacific Index are trading at an average 43 times reported earnings, up from the 15 times shares were trading at during the market's trough in March. Companies on the S&P 500 are currently at 14 times profit.
In Singapore, The Straits Times Index advanced 5.3 per cent last week, after the trade ministry said the city's gross domestic product will shrink between 4 per cent and 6 per cent this year, less than an earlier forecast for a contraction of as much as 9 per cent.
The economy grew an annualised 20.4 per cent in last quarter from the previous three months, after declining to a revised 12.7 per cent between January and March, it said.
CapitaLand surged 10 per cent to S$3.73 (Dh9.54). City Developments Ltd, Singapore's second-largest property company, jumped 14 per cent to S$9.38. City Developments has started selling an 85-unit development, The Business Times reported on Saturday.
"This upward trend will continue for some time, as economic indicators have confirmed the economy is recovering," said Harvey Chang, a SinoPac Securities Investment Trust Co. fund manager who helps oversee about $1.5 billion. "There's plenty of money in the market."
Energy shares, material producers and finance companies were the best performing of the MSCI Asia Pacific Index's 10 industry groups last week on speculation economic growth will boost commodity prices, real-estate demand and bank lending.
Alumina jumped 15 per cent to A$1.52 (Dh4.48), while Fortescue Metals Group Ltd., Australia's third-largest iron ore exporter, climbed 15 per cent to A$3.92. BHP Billiton Ltd, the world's largest mining company and Australia's largest oil producer, added 7.8 per cent to A$35.20.
A gauge of six metals in London rose 9.1 per cent, the best week since February 6. Oil futures in New York added 6.1 per cent, the biggest weekly advance since May 29.
Among finance companies, Bank of Communications, part owned by HSBC Holdings Plc, rose 8.3 per cent to HK$8.83 (Dh4.81) in Hong Kong. HSBC, Europe's largest lender, climbed 9.2 per cent to HK$68.30.
Sumitomo Realty & Development Co., Japan's No 3 developer, rose 5.2 per cent to 1,646 yen. Takashi Hashimoto, a Barclays Capital analyst in Tokyo, assigned an "overweight" recommendation to the company in new coverage.
"The freefall of the economy has stopped," New York University's Roubini, who predicted the financial crisis, said on July 16.
"There is light at the end of the tunnel. And the light at the end of the tunnel for once is not the one of an incoming train."
Roubini reiterated his earlier prediction that the contraction would last 24 months.
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