By Patrick Rial and Masaki Kondo
July 30 (Bloomberg) -- Asian stocks rose, rebounding from earlier declines, as better-than-expected earnings from Honda Motor Co. and Nissan Motor Co. bolstered investor confidence in the prospects for a global economic recovery.
Honda Motor Co. and Nissan Motor Co. gained more than 7 percent in Tokyo. Mitsubishi Electric Co., which makes everything from air conditioners to factory robots, soared 15 percent in Tokyo after saying the worst is over for the company. Commonwealth Bank of Australia led gains by the nation’s banks after upgrades by Citigroup Inc. China’s benchmark climbed, recovering from its biggest drop in eight months yesterday.
The MSCI Asia Pacific Index added 0.7 percent to 109.95 as of 5:32 p.m. in Tokyo, reversing a decline of as much as 0.3 percent. The gauge dropped yesterday for the first time in 12 days. The 13 percent rally swelled prices to 24.7 times estimated profit, the highest ratio since March 30.
“Positive earnings surprises are supporting the market although the current valuations can’t be justified without further improvement in earnings prospects,” Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages the equivalent of $13 billion.
Stocks rose in Hong Kong and China after the People’s Bank of China said it would maintain “moderately loose” monetary policy and use “market tools instead of quantity controls” to control lending. The Hang Seng Index gained 0.5 percent, while the Shanghai Composite Index rebounded from a 5 percent decline yesterday to rise 2.1 percent.
Nikkei 225, Benchmarks
Japan’s Nikkei 225 Stock Average rose to its highest level since Oct. 6, climbing 0.5 percent to 10,165.21 as the nation’s manufacturers boosted production for a fourth month. Sony Corp., which reported a smaller-than-forecast quarterly loss after the close of trading, jumped 6.8 percent.
Futures on the U.S. Standard & Poor’s 500 Index climbed 0.3 percent, after dipping 0.5 percent yesterday.
Mitsubishi Electric soared 15 percent to 710 yen, its steepest gain since October and the biggest advance in the MSCI World Index. The company posted a narrower-than-expected 8.25 billion yen ($87 million) net loss for the latest quarter as sales of heavy equipment rose.
“The worst is already behind us,” Hiroki Yoshimatsu, an executive officer, said at a news briefing.
A third of the 36 companies in the Nikkei 225 that published results through yesterday beat analyst estimates, compared with 17 percent with worse-than-expected earnings, according to data compiled by Bloomberg.
Japanese Carmakers Rise
Honda, Japan’s second-largest carmaker, jumped 8.7 percent to 3,010 yen. The automaker raised its operating profit forecast yesterday after Tokyo markets closed to 70 billion yen for the year to March 2010, citing cost cuts. Nomura raised its rating on the carmaker to “buy” from “neutral.”
Nissan soared 10 percent to 694 yen. Japan’s No. 3 automaker posted a first-quarter net loss that was less than a third of what analysts had projected. Mazda Motor Co. gained 8.6 percent to 264 yen.
“Companies are coming out with results that give investors a sense of relief,” said Mitsushige Akino, who oversees about $631 million at Ichiyoshi Investment Management Co. in Tokyo.
Commonwealth Bank, Australia’s largest by market value, jumped 4.3 percent, and National Australia Bank Ltd. rose 3.8 percent. Both were raised to “buy” from “hold” at Citigroup, which identified 10 reasons for optimism on Australian lenders, including narrowing credit spreads and the “elimination” of solvency risk.
Oil, Metals Drop
Cnooc Ltd., China’s biggest offshore oil explorer, sank 1.5 percent to HK$10.26 in Hong Kong. BHP Billiton Ltd. slid 0.8 percent to A$37.15 in Sydney. Sumitomo Metal Mining Co., Japan’s biggest nickel and gold producer, tumbled 3.9 percent to 1,392 yen after reporting a 78 percent drop in first-quarter profit and as nickel fell the most in more than two weeks.
Crude oil declined 5.8 percent in New York yesterday, the most since April 20, and a gauge of metals in London fell 1.8 percent.
“We’re in that situation where the short-term consequences of a recovery are obvious, but the long-term issues are not so obvious,” said David Murray, chairman of the Future Fund, the Australian sovereign-wealth fund. “It’s a little bit of a time- out at the moment.”
Manila Electric Co., the largest power retailer in the Philippines, fell the most in four months on speculation a bidding war between the company’s two biggest owners will end. The stock tumbled 18 percent, the most in the MSCI Asia Pacific.
‘Anxiety, Choppiness’
The index rallied 55 percent through yesterday from a more than five-year low on March 9 on rising confidence the worst of the global recession has passed. Japanese manufacturers increased production 2.4 percent in June, a report from the Trade Ministry showed today, capping the fastest quarterly output expansion in more than half a century.
“Given the extent of the rally, it will create anxiety and short-term choppiness among investors,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “The fact that world economic indicators have improved shows earnings will recover, so at this point in the cycle there should be no worries about valuations.”
A report last week by the Ifo institute showed German business confidence rose for a fourth month in July, suggesting Europe’s largest economy is on the path to recovery. Meanwhile, initial jobless claims in the U.S. have come in under 600,000 for the last three weeks, according to government data, and economists expect them to total 575,000 in a report today.
Carlsberg Brewery Malaysia Bhd., Malaysia’s biggest beermaker, gained 6.1 percent to 4.50 ringgit, the highest since November 2007. Credit Suisse Group AG and RHB Research Institute Sdn. upgraded their ratings on the stock.
NEC Electronics declined 5.3 percent to 967 yen, the sharpest decline since July 13. The company’s loss widened amid a slump in demand for devices used in automobiles, flat-panel televisions and handsets.
Techtronic Industries Co., which makes Hoover vacuum cleaners and Ryobi power tools, sank 5.9 percent to HK$6.65 in Hong Kong after saying it will raise funds by selling new shares.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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