By Shani Raja and Masaki Kondo
Aug. 11 (Bloomberg) -- Asian stocks rose for a second day as earnings reports and brokerage upgrades boosted confidence that corporate profits are recovering from the global recession.
Aioi Insurance Co. climbed 4.2 percent in Tokyo on higher earnings, even after a magnitude-6.5 earthquake injured more than 40 people. Golden Agri-Resources Ltd., the world’s No. 2 palm oil producer, jumped 12 percent and Nippon Sheet Glass Co. surged 9.2 percent as brokerages recommended investors buy the shares. Tencent Holdings Ltd., operator of China’s biggest online chat service, rose 6.7 percent in Hong Kong amid analyst predictions the company will report higher profit tomorrow.
The MSCI Asia Pacific Index rose 0.5 percent to 112.31 at 3:22 p.m. in Tokyo. The gauge has gained 59 percent from a five- year low on March 9 on speculation of a global economic recovery. Stocks in the measure are valued at an average 24 times estimated profit, higher than the MSCI World Index’s 17 times.
“Investor sentiment remains resilient with the global economy and company earnings on the mend,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $89 billion.
Japan’s Nikkei 225 Stock Average added 0.6 percent, while Hong Kong’s Hang Seng Index advanced 0.4 percent. The Taiex Index gained 0.4 percent in Taiwan, where as many as 500 people are feared dead after a typhoon caused a mudslide. The Shanghai Composite Index added 0.7 percent as the statistics bureau said the nation’s retail sales expanded.
Insurance Earnings
JB Hi-Fi Ltd., a discount retailer, rallied 8.7 percent in Sydney and Qingdao Haier Co., a unit of China’s biggest appliance maker, gained 7 percent in Shanghai after both companies reported earnings growth. Malaysia’s Bandar Raya Developments Bhd. climbed 6.3 percent after profit doubled.
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. U.S. stocks fell yesterday, led by commodity producers and retailers, after four straight weeks of gains left the S&P 500 trading at the highest level relative to earnings since 2004. The U.S. gauge declined 0.3 percent yesterday.
Aioi added 4.2 percent to 477 yen after saying net income more than quadrupled in the three months to June 30. Mitsui Sumitomo Insurance Group Holdings Inc., which reported a 37 percent increase in first-quarter earnings, gained 2 percent to 2,615 yen. Fuji Fire & Marine Insurance Co. surged 15 percent to 138 yen.
Mitsui Sumitomo Insurance said it’s considering its response to today’s earthquake, including creating a task force to gather information and analyze damage.
Quake-Related Shares
The earthquake hit 23 kilometers (14 miles) below the seabed 170 kilometers from Tokyo at 5:07 a.m. local time, shaking buildings in the capital, the Japan Meteorological Agency said on its Web site.
P.S. Mitsubishi Construction Co., which constructs disaster prevention facilities, climbed 5.6 percent to 413 yen. Fudo Tetra Corp., which performs ground improvement works, rallied 5.1 percent to 82 yen.
“Speculators are buying earthquake-related shares for quick returns,” said Masayoshi Yano, a senior market analyst at Tokyo-based Meiwa Securities Co. “The tremor doesn’t have an impact on those companies’ fundamentals and I don’t think their gains will last long.”
A third of the 443 companies in the MSCI Asia Pacific Index that have reported quarterly results so far have beaten analysts’ profit estimates, while 16 percent have missed, according to data compiled by Bloomberg.
Tencent rose 6.7 percent to HK$118.60. The company may post a 61 percent gain in second-quarter profit tomorrow, according to the median of three analysts’ estimates in a Bloomberg survey. Hong Kong Exchanges & Clearing Ltd., which is also due to report results tomorrow, gained 3.9 percent to HK$152.10.
Rising Valuations
Better-than-expected earnings and economic reports worldwide have driven stocks higher 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.
Data last week showed Australian employers unexpectedly added jobs and pointed to improving manufacturing industries in China, Europe and the U.S.
“We’ve gone up too fast and need to slow down,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Technical indicators show the market is overheating.”
The MSCI Asia Pacific’s 14-day relative strength index, which measures how rapidly prices have risen or fallen, rose to 66 today, just below the 70 threshold some investors use as a signal to sell.
‘Overweight’ Recommendation
Golden Agri-Resources advanced 12 percent to 47.5 Singapore cents, its highest since Sept. 3. Morgan Stanley initiated coverage of the stock, with an “overweight” rating and share- price estimate of 50 Singapore cents, saying the industry is “attractive” as crude palm oil prices are likely to increase.
Nippon Sheet Glass surged 9.2 percent to 355 yen, leading gains in shares on the Nikkei. Bank of America Corp.’s Merrill Lynch unit recommended investors “buy” the stock. The brokerage set its price estimate on the stock at 355 yen, saying price increases in Europe will contribute to earnings.
JB Hi-Fi, the best-performing retailer in Australia’s benchmark stock index this year, rallied 8.7 percent to A$17.30 after second-half profit rose 53 percent on sales of video games and flat-panel televisions. Qingdao Haier, which makes air conditioners and refrigerators, gained 7 percent to 16.15 yuan after first-half earnings climbed 21 percent.
Bandar Raya, a Malaysian property developer, rose 6.3 percent to 1.70 ringgit after the company said second-quarter profit more than doubled from a year earlier.
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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