BLBG: Asian Stocks Rebound After Three-Week Retreat
Asian stocks rose after three weeks of losses in global equity markets sent valuations to the lowest levels in more than two years, metals gained and credit risk declined. The Australian and New Zealand dollars strengthened, while the yen and Swiss franc weakened.
The MSCI Asia Pacific Index gained 1.4 percent at 1:29 p.m. in Tokyo, snapping a two-day loss, and futures on the Standard & Poor’s 500 Index climbed 0.6 percent. Copper jumped 0.7 percent. The cost of insuring corporate and sovereign bonds in Asia against non-payment fell. The yen fell 0.2 percent to 76.83 per dollar, while the franc fell versus the euro for a third day.
Global markets are stabilizing after a week of record swings in U.S. stocks that was sparked by S&P’s downgrade of its credit rating for the world’s largest economy. Japan said today that its gross domestic product shrank less than economists estimated in the second quarter, a sign of recovery from the March 11 earthquake and tsunami that caused a nuclear accident. Finance Minister Yoshihiko Noda warned yesterday that he’s ready to intervene to stem yen gains that pose a risk to exports.
“Investors may be heartened that things don’t seem quite as disastrous as they seemed,” said Stephen Halmarick, Sydney- based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “Still, markets have got to come to terms with the fact that global growth isn’t going to be nearly as robust as they once expected.”
Stocks Rout
Asian stocks are recovering after losses wiped out $6.3 trillion in the market value of global equities since July 24, according to data compiled by Bloomberg. The price-earnings ratio for the MSCI All-Country World Index fell to 11.8 on Aug. 10, the lowest since March 2009.
The MSCI Asia Pacific Index swung 5.7 points in intraday trading on Aug. 9, the most since March, according to data compiled by Bloomberg. Benchmark equity gauges in Australia, China, Hong Kong, India, Taiwan and South Korea touched levels last week that were more than 20 percent below their peaks of the past 18 months. Declines of that magnitude signify a bear market to some investors.
Hong Kong’s Hang Seng Index (HSI) rose 2.3 percent, while Australia’s S&P/ASX 200 Index gained 1.9 percent. Markets in India and South Korea are shut for holidays.
“Asia is looking quite attractive, relative to the U.S. and Europe,” said Catherine Yeung, investment director at Fidelity International, which oversees about $256 billion. “You can find some very attractive buying opportunities in terms of growth names that have been indiscriminately sold off because of the panic selling.”
Increased Weighting
Morgan Stanley increased its emerging-market equity allocation to 58 percent of assets, or 8 percentage points more than the benchmark level. The weighting was increased from 56 percent and is the highest since April 2009, analysts led by Jonathan Garner, the brokerage’s chief emerging-market and Asia strategist, wrote in a report today.
Sony Corp., Mazda Motor Corp. and Fanuc Corp. rallied more than 3.1 percent today, leading gains in the Nikkei 225 Stock Average. The Japanese equity benchmark climbed 1.1 percent, poised for the biggest advance in two weeks, after the better- than-expected report on Japan’s economy.
Gross domestic product in Japan shrank at an annualized 1.3 percent rate in the three months ended June 30, marking a third quarterly decline, the Cabinet office said today in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was for a 2.5 percent drop.
‘Unstable Situation’
The yen retreated from close to a record against the dollar. It traded stronger than the level that prompted Japan to sell the currency on Aug. 4 for the first time since March.
“An unstable situation is continuing,” Noda said yesterday during a television talk show on public broadcaster NHK. “As foreign-exchange market matters are my prerogative, I will continue to closely watch the markets and take bold action if it becomes necessary.”
Futures on the S&P 500 climbed to 1,183.70. The swings in U.S. equities last week were unprecedented in the history of the American stock market, according to data compiled by Birinyi Associates Inc., Bloomberg and Howard Silverblatt, senior index analyst at S&P.
Treasuries were little changed as 10-year yields held at 2.26 percent, 1.34 percentage points less than the U.S. inflation rate. A record-low yield of 2.03 percent on Aug. 9 translated into a so-called real yield of negative 1.57 percent, a level not seen since 2008.
Bond Risk Falls
The cost of insuring corporate and sovereign bonds in Asia against default fell, with the Markit iTraxx Australia index 11 basis points lower at 150 as of 10:28 a.m. in Sydney, Credit Agricole CIB prices show. That’s down from a two-year high of 156 basis points on Aug. 12, according to data provider CMA.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 6 basis points to 147 as of 8:54 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc prices. The Markit iTraxx Japan index fell 4 basis points to 135 as of 9:28 a.m. in Tokyo, according to Citigroup Inc. prices.
Copper for delivery in three months on the London Metal Exchange rose 0.7 percent to $8,928 a metric ton. Nickel climbed 1.4 percent and zinc advanced 1.8 percent.
Hedge funds cut bullish bets on oil to the lowest level in more than eight months amid signs the global economic recovery was losing momentum. The funds and other large speculators reduced their net-long positions, or wagers that prices will rise, by 11 percent in the week ended Aug. 9 to the lowest level since Nov. 23, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report.
Crude oil for September delivery was at $85.40 a barrel, up 2 cents, in electronic trading on the New York Mercantile Exchange.
Weaker Franc
The Swiss franc dropped 2 percent to 1.13091 per euro and 1.6 percent to 79.08 centimes per dollar. The Swiss currency has fallen 5 percent over the past week, making it the worst performer among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes.
The Swiss National Bank may set a target for the currency in “coming days,” SonntagsZeitung reported. The talks are focusing on the role of the government and an “appropriate plan” may be adopted on Aug. 17, it said. SNB spokesman Walter Meier declined to comment.
The Australian and New Zealand dollars advanced against most of their 16 major counterparts as Asian stocks extended a global equities rally, bolstering demand for higher-yielding assets. The so-called Aussie climbed 0.5 percent to $1.0408 and the kiwi also added 0.7 percent to 83.81 U.S. cents.
Ringgit, Yuan
Asia’s emerging-market currencies also appreciated. The ringgit strengthened 0.6 percent to 2.9830 per dollar, according to data compiled by Bloomberg. The Philippine peso gained 0.4 percent to 42.475 and the Thai baht rose 0.2 percent to 29.88.
Yuan forwards traded near their highest level in more than three years after the People’s Bank of China strengthened its reference rate for the currency for a fourth day. The People’s Bank of China set the daily fixing 0.03 percent higher at a record 6.3950 per dollar. The yuan had its biggest gain since 2007 last week as official data showed consumer prices rose the most in three years in July and China’s trade surplus surged.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
