Asian Stocks Gain on Earnings Speculation; Leighton Advances

By Jonathan Burgos

Aug. 14 (Bloomberg) -- Asian stocks advanced, driving the MSCI Asia Pacific Index to a 10-month high, after increased earnings and profit forecasts from the construction industry and Wal-Mart Inc.’s biggest clothing and toys supplier.

Leighton Holdings Ltd., Australia’s biggest construction company, surged 7.3 percent after predicting higher earnings. Hong Kong’s Li & Fung Ltd., which sells its products to Wal-Mart and Target Corp., gained 7.7 percent on better-than-estimated profit. Mitsubishi Corp., which gets more than a third of its sales from resources, climbed 3.3 percent in Tokyo after metal prices rose. Yanzhou Coal Mining Co. rallied 6.3 percent in Shanghai after agreeing to buy Felix Resources Ltd.

“Potential earnings estimate upgrades will help support a bull run in equities as long as interest rates remain low,” said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd., which holds $7 billion of assets.

The MSCI Asia Pacific Index rose 0.4 percent to 113.85 as of 3:33 p.m. in Tokyo, on course for its highest close since Sept. 25. The gauge has gained 61 percent from a more than five- year low on March 9 amid speculation stimulus measures and lower borrowing costs worldwide will help revive the global economy. The measure added 2.8 percent this week.

Japan’s Nikkei 225 Stock Average added 0.8 percent to 10,597.33. Australia’s S&P/ASX 200 Index climbed 0.6 percent, while South Korea’s Kospi Index advanced 1.7 percent.

Hong Kong’s Hang Seng Index slipped 0.7 percent. China’s Shanghai Composite Index sank 2.2 percent, set for the biggest weekly decline since February, amid concern its 68 percent rally this year had overvalued earnings prospects.

Noble, Nexus

Noble Group Ltd., the Hong Kong-based supplier of raw materials from soybeans to coal, advanced 3.5 percent in Singapore after reporting higher earnings. Nexus Energy Ltd. jumped 20 percent on speculation it will find a partner for a venture in Australia. LG Display Co., the world’s No. 2 liquid- crystal-display maker, gained 3.3 percent in Seoul after Nomura Holdings Inc. recommended investors buy the stock.

Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge rose 0.7 percent yesterday as better-than-estimated earnings from Wal-Mart Stores Inc. overshadowed an unexpected decline in retail sales. Banks gained after investor John Paulson’s hedge fund bought stakes in lenders.

The S&P 500 had dropped as much as 0.5 percent following government reports on retail sales and initial jobless claims that were worse than economists had predicted.

Mergers, Acquisitions

Confidence in the global economy and better-than-estimated earnings have driven the equity rally since March, lifting the average valuation of the MSCI Asia Pacific’s companies to a four-month high of 25 times estimated profit on July 28. Stocks on the gauge now trade at 24.8 times earnings, higher than the MSCI World Index’s 17 times.

Data in the past week show that the euro-region economy barely contracted in the second quarter as Germany and France unexpectedly returned to growth. The U.S. jobless rate dropped and Japanese machinery orders increased.

Leighton climbed 7.3 percent to A$33.30. The company said net income may rise to about A$600 million ($507 million) in the year ending June 30, similar to 2008’s record earnings.

Li & Fung, which supplies retailers including Wal-Mart Stores and Target Corp., advanced 7.7 percent to HK$27.40. The company said first-half profit rose 13 percent to HK$1.4 billion ($181 million) after it cut costs. That beat the average estimate of HK$1.2 billion in a Bloomberg News analyst survey.

A third of the 490 companies in the MSCI Asia Pacific Index that have reported quarterly results in the latest earnings season have beaten analysts’ profit estimates, while 17 percent have missed, according to data compiled by Bloomberg.

One-Time Gain

Noble Group rose 3.5 percent to S$2.07. The company said second-quarter profit more than doubled to $248.8 million, from $122.5 million, a year earlier, helped by a one-time gain from the acquisition of Gloucester Coal Ltd.

Chiangmai Frozen Foods Pcl advanced 8.3 percent to 3.64 baht in Bangkok. The exporter of frozen vegetables and fruits said second-quarter profit increased 46 percent.

Mitsubishi gained 3.3 percent to 1,994 yen. Rio Tinto Group, the world’s third-largest mining company, added 2 percent to A$59.99 in Sydney. A gauge of six metals in London climbed 3.6 percent yesterday to the highest level since Sept. 30. Copper rose 3.2 percent in New York.

Yanzhou Coal, China’s fourth-biggest producer of the fuel, gained 6.3 percent to 21.24 yuan. The company will pay about A$3.5 billion ($2.9 billion), or A$18 a share for Felix, including a dividend and stock in a unit. Felix rose 4.1 percent to A$17.60.

Mergers, Acquisitions

“China has been trying to accumulate resources to support its economic growth,” Baring Asset’s Do said. “That will continue to drive M&A activities in the resource sector, supporting valuations.”

Nexus Energy jumped 20 percent to 41.5 Australian cents, amid speculation it’s close to finding a partner for its Crux condensate venture in northern Australia. Jodie Phillips, a Melbourne-based spokeswoman for Nexus, couldn’t immediately be reached for comment.

LG Display climbed 3.3 percent to 37,200 won, taking gains in the past four days to 10 percent. Nomura raised its rating on the stock to “buy’ from “reduce”

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.