Asian Stocks Rise on Profits; MSCI Set for Fifth Monthly Gain

By Patrick Rial and Masaki Kondo

July 31 (Bloomberg) -- Asian stocks rose, sending the MSCI Asia Pacific Index to a fifth monthly gain, as earnings from Sony Corp. and Datang International Power Generation Co. and a commodities rally spurred confidence the economy is recovering.

Sony, the maker of Vaio computers and PlayStation 3 game consoles, jumped 5.4 percent in Tokyo after cost cuts led to a smaller-than-expected loss. Datang, China’s No. 2 electricity producer, jumped 6.6 percent in Hong Kong after saying first half profit likely rose more than 50 percent. Rio Tinto Group, the world’s third-largest mining company, rallied 3.3 percent in Sydney following a jump in prices of copper, nickel and oil.

The MSCI Asia Pacific climbed 1.7 percent to 111.68 as of 12:43 p.m. in Tokyo, the highest Sept. 26. The benchmark has risen 7.9 percent this month, capping a 58 percent rally from the lowest in more than five years in March.

“An earnings and economic recovery in the second half was rather like a wishful thought,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $90 billion. “That’s getting more likely now and increasing investors’ appetite for risk assets.”

Japan’s Nikkei 225 Stock Average rose 1.4 percent to 10,304.90. Benchmarks open for trading throughout Asia climbed.

Still, reports today showed Japan’s jobless rate rose to a six year high, and consumer prices posted a record decline in June, raising concern any economic recovery will be muted. Nintendo Co. tumbled 5.1 percent after falling console sales pushed profits lower, while Mazda Motor Corp. slumped 5.7 percent after posting a third straight quarterly loss.

‘Unexpected Profits’

Futures on the Standard & Poor’s 500 Index rose 0.3 percent in trading today. Earnings reports from Motorola Inc. and MasterCard Inc. propelled the S&P 500 to a 1.2 percent gain yesterday to 986.75, the highest level in almost nine months.

Sony added 5.4 percent to 2,640 yen. The company reported a first-quarter net loss that was less than half analysts’ estimates. Nomura Holdings Inc. lifted its rating on the stock to “buy” from “neutral” on better-than-forecast performance at the company’s financial unit and cost reductions.

“Losses are shrinking, and some companies are unexpectedly turning profits, painting a bright picture,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo. “Investors will have to start paying attention not only to the fruits of cost cuts, but also the outlook for a sales rebound that’s coming.”

Datang International rose 6.6 percent to HK$5.15. The power producer said in a preliminary earnings statement that profit rose more than 50 percent in the six months through June on rising revenues and tariff changes.

Yamato Holdings

Yamato Holdings Co., Japan’s largest parcel-delivery company,　jumped 8.6 percent to 1,415 yen, set for the highest close in a year, and the steepest increase in the Nikkei 225. The company lifted its full-year net income forecast by 6.8 percent. Rival Nippon Express Co., which reports earnings today, climbed 5.9 percent to 432 yen.

Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, rose 5.4 percent to NT$59 in Taipei, the most in two months. Revenue this quarter will be NT$88 billion ($2.7 billion) to NT$90 billion, while gross margin will be 46.5 percent to 48.5 percent, the company said yesterday, beating analyst estimates.

Outpacing U.S., Europe

Kikkoman Corp. surged 6.2 percent to 1,098 yen, headed for the highest since Oct. 22. First-quarter net income at Japan’s biggest soy-sauce maker rose 20 percent from a year earlier, the company said yesterday.

Industrial Bank of Korea, South Korea’s largest lender to small- and medium-sized companies, gained 3.7 percent to 14,000 won after second-quarter profit exceeded analyst estimates.

The MSCI Asia Pacific has surged 58 percent since March 9, outpacing gains of 46 percent by the S&P 500 and 43 percent by Europe’s Stoxx 600 Index. Accelerating growth in China, rising industrial production in Japan, and a rally in commodities prices have helped boost shares throughout the region.

Stocks in the MSCI Asia Pacific are currently valued at 24.5 times estimated earnings, compared with 18 times at the start of the year.

Rio Tinto rose 3.3 percent to A$59.99 in Sydney. BHP Billiton Ltd., the world’s largest mining company, advanced 1.7 percent to A$37.77. Woodside Petroleum Ltd., Australia’s second- largest oil producer, gained 2.2 percent to A$45.49.

Crude oil soared 5.7 percent in New York yesterday, the biggest gain since April 9. The Reuters/Jefferies CRB Index jumped 3.9 percent, the steepest advance since March 19.

Nintendo, the world’s biggest maker of handheld game players, slumped 5.3 percent to 25,380 yen after falling Wii and DS console sales caused net income to slide by more than half last quarter. UBS AG initiated a “short-term sell” recommendation on the company.

Mazda, Japan’s second-largest car exporter, sank 4.9 percent to 251 yen. The company had a loss of 21.5 billion yen ($264 million) last quarter as sales fell 45 percent.

Cycle & Carriage Bintang Bhd., a Malaysian distributor of Mercedes-Benz vehicles, jumped 29 percent to the highest in almost three years after declaring a special dividend.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.