07 Oct 2009
Oct. 7 (Bloomberg) -- Asian stocks rose for a second day, led by mining companies and banks, as gold prices surged to a record and brokerages upgraded companies including Sumitomo Mitsui Financial Group.
BHP Billiton Ltd., the world's biggest mining company, gained 2.7 percent and Newcrest Mining Ltd., Australia's largest gold producer, surged 6.4 percent in Sydney. Sumitomo Mitsui Financial Group Inc., Japan's second-largest publicly traded bank by market value, jumped 6.3 percent in Tokyo after Nomura Holdings Inc. raised its share-price target.
The MSCI Asia Pacific Index gained 1.1 percent to 116.96 as of 12 p.m. in Tokyo, extending yesterday's 1.7 percent advance. The gauge has risen 63 percent in the past seven months on signs the global economy is emerging from its worst slowdown since World War II. Australia unexpectedly raised interest rates yesterday amid indications of economic growth.
"The improvement in Asian stocks can be attributed to further evidence the global economy is on the mend," said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. "Investors waiting for a pullback to increase equity exposure continue to be disappointed."
Australia's S&P/ASX 200 Index climbed 1.7 percent. Crane Group Ltd., the country's biggest distributor of plumbing supplies, was upgraded at Credit Suisse Group AG. In Tokyo, Hitachi Ltd., a nuclear reactor maker, added 8.1 percent as Mizuho Securities Co. raised its recommendation on the stock.
Japan's Nikkei 225 Stock Average increased 0.9 percent as Mitsui O.S.K. Lines Ltd. advanced 3.1 percent after a gauge of shipping fees increased the most since July. Hong Kong's Hang Seng Index rose 1.8 percent, while Taiwan's Taiex Index gained 0.7 percent.
U.S. Earnings
Futures on the U.S. Standard & Poor's 500 Index were little changed. The gauge added 1.4 percent yesterday on speculation third-quarter earnings will top estimates. Alcoa Inc. is scheduled to release third-quarter results later today, the first company in the Dow Jones Industrial Average to report.
Material stocks accounted for 22 percent of the MSCI Asia Pacific Index's advance today after gold futures climbed as much as 2.7 percent to a record $1,045 an ounce in New York, while copper increased for a second day with a 2.1 percent increase. Crude oil rose 0.7 percent.
BHP gained 2.7 percent to A$37.64, while Rio Tinto Group, the world's third-largest mining company, climbed 4.3 percent to A$60.20. Newcrest jumped 6.4 percent to A$35.02. Inpex Corp., Japan's largest oil explorer, rose 2.3 percent to 750,000 yen.
Dollar Decline
Raw-material prices climbed as the dollar's decline spurred demand for commodities as a hedge against inflation. The Dollar Index, which measures the U.S. currency against six major counterparts, traded near a two-week low as speculation the Federal Reserve will trail other central banks in raising interest rates made the greenback less attractive.
"Commodities are priced in dollars and a weak U.S. currency inevitably raises their prices," said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. "Gains in commodities are generally positive for resource companies."
The dollar weakened to as much as 88.65 yen from 88.98 at the 3 p.m. close of Tokyo stock trading yesterday. The U.S. currency's decline came as Australia's surprise interest-rate hike yesterday boosted demand for higher-yielding assets.
The Reserve Bank of Australia's decision to lift the overnight cash rate target to 3.25 percent from a 49-year low of 3 percent followed the first expansion this year in U.S. service industries. Manufacturing in emerging markets increased the most in the past three months since the second quarter of 2008, according to the HSBC Emerging Markets Index of data from purchasing managers.
Rising Valuations
Speculation of a global recovery has driven the MSCI Asia Pacific Index up by 66 percent from a more than five-month low on March 9. That's lifted the average price of companies on the gauge to 23 times estimated earnings from 21 times at this year's trough.
"The weight of conviction is edging towards the recovery view," said Michael Auyeung, who manages about $500 million as chief investment officer at Pacific Mutual Fund Bhd. in Petaling Jaya, outside Kuala Lumpur. "The stop-start nature of some of the economic data flows should be expected, but the trends are discernibly more to the upside."
Sumitomo Mitsui jumped 6.3 percent to 3,360 yen, while market leader Mitsubishi UFJ Financial Group Inc. climbed 5.3 percent to 500 yen. Nomura raised its price estimate on Sumitomo Mitsui by 8.9 percent to 4,900 yen, saying the bank was starting to cut costs to boost profit.
Hitachi climbed 8.1 percent to 295 yen after Mizuho Securities raised its investment rating on the company to "strong buy" from "hold." Australia's Crane rose 2.3 percent to A$10.78 after Credit Suisse upgraded the stock to "neutral" from "underperform."
Mitsui O.S.K., Japan's No. 2 shipping line, added 3.1 percent to 533 yen. Smaller rival Kawasaki Kisen Kaisha Ltd. gained 3 percent to 340 yen. The Baltic Dry Index, a measure of shipping costs for commodities, rose 3.3 percent yesterday in London, the steepest climb since July 16.
