Asian stocks rose, led by auto makers and consumer companies, after the US jobless rate dropped and Japanese machinery orders increased, boosting confidence that the world’s two largest economies are emerging from recession.
Honda Motor Co, which gets 45 per cent of its revenue from North America, gained 3.6 per cent in Tokyo. Bridgestone Corp, the world’s largest tyre maker, rose 5.6 per cent in Tokyo after forecasting a profit. China Mobile advanced 3.4 per cent in Hong Kong after the Chinese premier said the country will maintain policies aimed at bolstering domestic spending.
The MSCI Asia Pacific Index climbed 1.1 per cent to 111.93 as of 8.07 pm in Tokyo, following a 1 per cent drop last week. The gauge has risen 59 per cent from a more than five-year low on March 9 amid speculation that government stimulus efforts around the world will help the global economy recover.
The key message to investors is to buy the markets, said Kerry Series, head of Asia-Pacific equities at Sydney-based AMP Capital Investors, which holds $95 billion. The stimulus is starting to take effect and you can see its early stages. I think the stock market has reflected that.
Japan’s Nikkei 225 Stock Average rose 1.1 per cent to 10,524.26 as strategists at Nomura Holdings predicted the gauge may climb as high as 11,500 by the end of October. Mitsubishi Rayon, which makes fabrics and chemicals, surged 20 per cent after the Nikkei newspaper reported the company may be bought by rival Mitsubishi Chemical Holdings Corp.
Beating estimates
Hong Kong’s Hang Seng Index climbed 2.7 per cent. Australia’s S&P/ASX 200 Index advanced 0.1 per cent, led by the real-estate trust Goodman Group, which surged 16 per cent after a share sale eased concerns about the company’s debt levels. Rio Tinto Group, the world’s third-biggest mining company, sank 3.3 per cent on concern that strained relations with China may hurt profit.
Futures on the Standard & Poor’s 500 Index lost 0.4 per cent, while Treasuries fell for a sixth day. The S&P 500 climbed 1.3 per cent on August 7 after a Labor Department report showed the joblessness rate dropped to 9.4 per cent last month from June, the first decline since April 2008. Economists had estimated the rate would rise to 9.6 per cent.
Traders are betting the VIX, a gauge of expected swings on the S&P 500, will increase 13 per cent in the next five weeks. That’s the biggest spread since August 2008, right before the S&P 500 suffered the steepest two-month plunge in 21 years.
In Tokyo on Monday, Japan’s Cabinet Office said machinery orders, an indicator of capital investment in the next three to six months, climbed 9.7 per cent from May.
Higher forecast
Honda gained 3.6 per cent to ¥3,120. Sony Corp, which gets about a quarter of its sales from the US, climbed 3.2 per cent to ¥2,780. Komatsu, the world’s second-biggest maker of construction equipment, rose 2.9 per cent to ¥1,632.
Bridgestone jumped 5.6 per cent to ¥1,785 after forecasting full-year net income of ¥6 billion ($62 million), compared with an earlier break-even prediction.
The yen weakened against the dollar after the US jobs report, boosting the outlook for Japanese export earnings. Last week, the US currency strengthened 3.1 per cent against the yen, the steepest weekly advance in two months.
The companies’ efforts to cut costs boosted investor confidence in the outlook for earnings, Nomura strategists wrote in a report. The analysts said the Nikkei 225 may rise as high as 11,500 by the end of October, lifting a previous estimate that ranged between 10,500 and 11,000.
Rising valuations?
The stock rally since March has lifted the average price of companies in the MSCI Asia Pacific Index to 1.57 times book value, the highest level since September 10, which was five days before Lehman Brothers Holdings filed for bankruptcy. That level is still lower than the five-year average of 1.83 times book value.
Valuations are not stretched, but the market_s moved a hell of a long way since the bottom, said Mark Konyn, Hong Kong-based chief executive officer of RCM Asia Pacific, which holds $11 billion.
