By Shani Raja
Aug. 6 (Bloomberg) -- Asian stocks rose for the first time in three days as Alumina Ltd. posted a smaller-than-estimated underlying loss and Australian employers unexpectedly added jobs, boosting confidence the global economy is recovering.
Alumina, partner in the world’s biggest producer of the material used to make aluminum, surged 9.8 percent in Sydney. Nippon Telegraph & Telephone Corp., Japan’s biggest phone operator, climbed 2.5 percent after saying profit at its fixed- line units rose. Chinese stocks declined, led by Citic Securities Co.’s 3.8 percent drop in Shanghai, on concern the nation’s central bank may rein in lending.
The MSCI Asia Pacific Index gained 0.8 percent to 112.81 as of 5:38 p.m. in Tokyo, with five stocks advancing for every four that declined. The measure had fallen 1 percent in the previous two days. The gauge has climbed 60 percent from a five-year low on March 9 on speculation the global economy is recovering.
“The market is ostensibly in a bit of a sweet spot,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The momentum in economic fundamentals is improving in terms of global growth. We’ll need to see continued upgrades to earnings estimates to ensure the market continues its momentum higher.”
Hong Kong’s Hang Seng Index gained 2 percent, while Japan’s Nikkei 225 Stock Average rose 1.3 percent. Elpida Memory Inc. climbed 7.2 percent in Tokyo after JPMorgan Chase & Co. upgraded the stock. Australia’s S&P/ASX 200 Index added 1.5 percent as builder Leighton Holdings Ltd. gained 3.4 percent after predicting a rebound in Asian demand for resources.
Nikon, Cathay Pacific
Among stocks that fell today, Nikon Corp., which makes equipment used to produce semiconductors, tumbled 10 percent in Tokyo after forecasting a record loss. Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, dropped 3.6 percent after its chief executive said the global recession might require “fundamental changes” to its business model.
Futures on the Standard & Poor’s 500 Index rose 0.3 percent. The gauge dropped 0.3 percent yesterday after data from ADP Employer Services showed American businesses cut more workers from pay rolls last month than economists estimated. The Institute for Supply Management’s index of non-manufacturing businesses also declined in July.
Alumina rose 9.8 percent to A$1.795. The company reported an underlying loss of A$15 million ($12.6 million) in the six months ended June 30, beating the A$22 million median estimate of three analysts compiled by Bloomberg.
“It appears that the worst is over,” said Ben Potter, an analyst at IG Markets in Melbourne. “The headline numbers were certainly stronger than expected.”
Metals Prices
BHP Billiton Ltd., the world’s biggest mining company, gained 1.7 percent to A$38.79 after a gauge of six metals in London climbed 3.3 percent yesterday to a level not seen since Sept. 30. Aluminum prices jumped 4 percent, while copper added 2.5 percent. Rio Tinto Group, the world’s third-largest mining company, rose 1.9 percent to A$61.90.
NTT climbed 2.5 percent to 4,070 yen. The company said yesterday operating profits at its fixed-line units NTT East Corp. and NTT West Corp. grew at least 76 percent in the three months to June 30. The results of these subsidiaries tend to influence NTT’s share price, Hitoshi Hayakawa, an analyst at Credit Suisse Group AG, wrote in a report yesterday.
Elpida, Japan’s largest maker of computer-memory chips, gained 7.2 percent to 1,195 yen after JPMorgan Chase & Co. upgraded the stock to “overweight” from “neutral” on signs that earnings will “break even” in the December quarter.
Rising Valuations
Thirty-four percent of the 386 companies in the MSCI Asia Pacific Index that have reported quarterly results so far have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
Better-than-expected earnings and economic reports worldwide have driven stocks higher since March, lifting the average valuation of the MSCI Asia Pacific Index’s companies to a four-month high of 25 times estimated profit on July 28.
“The market is at the near-term ceiling,” said Mitsushige Akino, who oversees the equivalent of $632 million at Ichiyoshi Investment Management Co. “People are optimistic but don’t have enough catalysts to make them even more optimistic.”
In Sydney, Leighton, Australia’s biggest construction company, gained 3.4 percent to A$30 after Chief Executive Officer Wal King said the past 18 months represented only a “bump” in the minerals-demand cycle.
The number of Australians employed rose 32,200 from June, the country’s statistics bureau said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a decline of 18,000. The jobless rate held at 5.8 percent.
Fine Tuning
Citic Securities, China’s largest brokerage by market value, slumped 3.8 percent to 35.01 yuan after the People’s Bank of China said it will fine-tune monetary policy and ensure “appropriate” lending growth. Haitong Securities Co. sank 2.6 percent to 18.23 yuan.
The Shanghai Composite Index lost 2.1 percent, posting its first back-to-back drop in three weeks. The gauge has gained every month this year as record bank lending and government stimulus spending spur a rebound in the economy. Companies in the measure are valued at an average 36 times estimated profit, twice the level of stocks in the MSCI Emerging Market Index.
“The ‘fine-tune tone’ is spooking investors who are worried that the central bank will follow up with tightening measures, such as hiking the reserve ratio,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “With the market at a high-flying level, investors are very sensitive to any news related to liquidity.”
Record Loss
Nikon sank 10 percent to 1,690 yen. The company said its net loss will probably be 28 billion yen ($295 million) in the year ending March 2010, compared with a May projection of 17 billion yen. The deficit would be the largest for the company, according to financial records stretching back to 1992.
Cathay Pacific fell 3.6 percent to HK$11.74. The carrier said it was considering ripping out some premium-class seats and installing more economy seating as the recession forces companies to slash their travel budgets.
“We’re going to have to make fundamental changes to our business” if premium and cargo demand doesn’t return, Tony Tyler, the airline’s chief executive officer, said in a Bloomberg TV interview today.
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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