BackAsian stocks jump most since November before Janet Yellen testimony
The MSCI Asia Pacific excluding Japan Index advanced 1.2% to 449.9 for its steepest rally since 18 November
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Singapore: A gauge of Asian stocks outside Japan rose, for its biggest advance since November, before US Federal Reserve chairwoman Janet Yellen delivers her first testimony on monetary policy.
Zijin Mining Group Co., China’s biggest gold producer, jumped 8.1% in Hong Kong as the bullion headed for the longest rally since August. Australia and New Zealand Banking Group Ltd, Australia’s third-largest bank by market value, added 2.2% after posting a 13% jump in first-quarter cash profit. Tata Motors Ltd climbed 2.83% in Mumbai, rising for a sixth day, after India’s biggest auto maker posted quarterly profit that beat analyst estimates.
The MSCI Asia Pacific excluding Japan Index advanced 1.2% to 449.9 as of 6.26pm in Hong Kong, for its steepest rally since 18 November. The regional gauge has climbed 3.4% from a five-month low on 5 February as equities rebounded from a global rout. Yellen will speak on monetary policy and the outlook for the economy on Tuesday for the first time since being sworn in as the central bank’s head. Japanese markets are closed for a holiday.
“Investors think Yellen is going to be dovish given the recent weakness in US employment numbers," said Daphne Roth, the Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion. “The recent sell-down looks overdone. Long term investors could start accumulating Chinese shares. Valuations are cheap but investors will have to be mindful that financial conditions might remain tight as the government reins in excessive credit growth."
Worst start
The gauge of Asia-Pacific equities outside Japan dropped 5.2% in January for its worst start to a year since 2010 amid concern about the Fed’s stimulus cuts, China’s slowdown and volatility in developing markets. Global equity losses in 2014 peaked at $3 trillion on 4 February and have since narrowed to $1.4 trillion, data compiled by Bloomberg show.
Hong Kong’s Hang Seng Index climbed 1.8% on Tuesday, capping its biggest advance in more than two months. The Hang Seng China Enterprises Index of mainland companies traded in the city jumped 2.5% and China’s Shanghai Composite Index increased 0.8%.
The Hang Seng Index dropped to 9.8 times reported earnings at the end of last week, the widest discount versus the MSCI World Index since May 2003, data compiled by Bloomberg show. The gauge fell 5.8% this year as an official manufacturing index for January signalled a slowdown in the world’s second- largest economy, while the Hang Seng China measure slumped 8.9%.
‘Very attractive’
“Hong Kong at least for now is very attractive in terms of valuation," said Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd.
Australia’s S&P/ASX 200 Index rose 0.6%, extending gains after a private report showed business confidence rose in January for the first time in four months. Home-loan approvals in the country unexpectedly fell 1.9% in December from the previous month, while house prices jumped 9.3% last quarter from a year earlier, separate reports showed.
New Zealand’s NZX 50 Index advanced 0.3%. South Korea’s Kospi index and Taiwan’s Taiex gained 0.5%. Singapore’s Straits Times Index rose 0.4% and India’s S&P BSE Sensex Index added 0.1%.
Futures on the Standard and Poor’s 500 Index gained 0.5% on Tuesday. The equity benchmark rose 0.2% on Monday, extending gains for a third day, amid optimism that economic growth is robust enough to weather central bank stimulus cuts.
Fed stimulus
The Fed has already decided to slow the pace of its asset-purchase programme twice, reducing its monthly buying of bonds to $65 billion from $85 billion. A 7 February report from the labour department showed that payrolls rose by a less-than-projected 113,000 in January, while the unemployment rate unexpectedly dropped to the lowest level in more than five years.
“With US employment data materially deteriorating, there is a building argument that the Fed should ease off tightening monetary conditions," Gary Dugan, who helps oversee about $53 billion as Singapore-based chief investment officer in Asia and the Middle East for Coutts and Co., the wealth management unit of Royal Bank of Scotland Group Plc, wrote in an e-mail on Monday. “We suspect that Yellen would not want to significantly change policy at her first meeting in March."
Shares on the MSCI Asia Pacific Index that includes Japan traded at 12.7 times estimated earnings, compared with 15.3 for the S&P 500 and 14.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Of the 296 companies on the Asian index that have reported quarterly earnings since the beginning of January and for which estimates are available, 52% beat profit expectations, according to data compiled by Bloomberg.
Gold producers
Gold producers advanced as the bullion’s price rose as much as 1%, set for a fifth straight daily gain. Zijin Mining climbed 8.1% to HK$1.74 in Hong Kong. Newcrest Mining Ltd., Australia’s biggest producer of the metal, added 3.1% to A$11.45 in Sydney.
ANZ Bank gained 2.2% to A$30.56 after saying unaudited cash profit increased 13% to A$1.73 billion ($1.55 billion) from a year earlier on higher lending and lower bad debt charges.
Tata Motors climbed 2.83% to ₹ 374.30 in Mumbai. Net income almost tripled to ₹ 4,810 crore in the three months ended December as sales at its Jaguar Land Rover unit jumped, the company said on Monday. That surpassed the ₹ 3,510 crore median of 38 analyst estimates compiled by Bloomberg.
Among shares that dropped, Cochlear Ltd sank 8.9% to A$53.68 in Sydney after reporting first-half results and a second-half estimate that suggest the maker of hearing implants will miss its full-year profit forecast. Bloomberg
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