Asian Stocks Rise to 1-Year High as Earnings Outlook Improves

By Patrick Rial

Sept. 10 (Bloomberg) -- Asian stocks rose, sending the MSCI Asia Pacific Index to the highest level since the collapse of Lehman Brothers Holdings Inc., as profit from China Yurun Food Group rose and Texas Instruments Inc. lifted its forecasts.

China Yurun Food Group Ltd., the country’s biggest hog processor, jumped 7.4 percent after first-half profit rose 37 percent. Elpida Memory Inc., Japan’s largest computer memory maker, gained 3.4 percent after chipmaker Texas Instruments raised its third-quarter sales and earnings forecasts. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., gained 5 percent after saying it is seeing “pretty strong” re-orders from retailers.

“Investors are looking to upcoming earnings reports where we’re likely to see a fair number of companies lifting forecasts,” said Junichi Misawa, who helps oversee about $3 billion of Japanese equities at STB Asset Management Co. in Tokyo. “The market should stay strong into the end of the year, although after that we could see a pullback as stimulus measures run their course.”

The MSCI Asia Pacific climbed 1.3 percent to 117.01 as of 5:49 p.m. in Tokyo. It earlier touched 117.37, the highest intraday level since Sept. 10, 2008. That date is five days before Lehman filed for bankruptcy, helping to cause the credit market seizure that dragged the global economy into recession. The MSCI gauge has surged 65 percent in the past six months on speculation growth is recovering.

Japan’s Nikkei 225 Stock Average climbed 2 percent. Hong Kong’s Hang Seng Index gained 1.1 percent. Benchmark indexes throughout Asia rose, except in Pakistan and China. The Shanghai Composite Index sank 0.7 percent, the first drop in eight days.

Gorgon Project

Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipyard by sales, surged 13 percent, the most in the MSCI Asia gauge, on speculation the company will win orders from Chevron Corp.’s Gorgon natural gas project in Australia.

China Unicom Ltd., the country’s No. 2 mobile-phone carrier, gained 3.2 percent after Goldman Sachs Group Inc. upgraded the stock. Uranium producer Paladin Energy Ltd. dropped 3.1 percent in Sydney after issuing new shares.

Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge climbed 0.8 percent yesterday to an 11-month high, as Goldman Sachs Group Inc. recommended industrial companies and investor Michael Price said he’s finding value in American equities.

Stocks on the MSCI Asia Pacific are priced at an average 24 times estimated earnings, up from 14 times at the start of the year. Investors have bid up valuations amid data signaling the global economy is pulling out of recession.

Earnings Surprises

The U.S. Federal Reserve’s Beige Book showed yesterday 11 of its 12 regional banks reported signs of a stable or improving economy in July and August.

China’s house prices in 70 cities rose 2 percent in August, double the gain in July, the National Bureau of Statistics said today, after sales and investment surged. Japan is due to report a revised second-quarter growth figure tomorrow, which economists forecast will show the economy expanded at a 3.7 percent annualized rate.

The rally in Asian stocks since March has also been driven by profit reports in the past month that have exceeded analyst estimates. Some 35 percent of the 641 companies in the MSCI Asia Pacific Index that have reported net income since early July have beaten analyst predictions, while about 21 percent have missed, according to data compiled by Bloomberg.

Economic Recovery

“There’s an expectation that the V-shaped economic recovery is alive and well,” said Rob Patterson, who helps manage $3.3 billion at Argo Investments Ltd. in Adelaide. “Sentiment can sometimes run markets and at the moment it seems to be feeding on itself.”

Ample liquidity has caused “bubbles” in stocks, commodities and real estate, Zhu Min, Bank of China Ltd.’s vice president, said in an interview today. The company lent more money in the first half of the year than any other Chinese bank.

China Yurun added 7.4 percent to HK$15.06 after the company said first-half profit rose 37 percent to HK$841 million.

Elpida climbed 3.4 percent to 1,319 yen. Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, added 2.4 percent to NT$63.50. Sumco Corp., the world’s second-largest maker of silicon wafers, rose 3.9 percent to 2,270 yen.

Texas Instruments, the second-largest U.S. chipmaker, said third-quarter profit will be as high as 41 cents per share, compared with analyst projections for 35 cents. The company said it is seeing improving demand for chips used in some industrial applications, computers and consumer electronics.

Telecom Operators

Li & Fung gained 5 percent to HK$30.20. Bruce Rockowitz, the company’s president, told Bloomberg Television today that spending by consumers has started to “creep up.”

Thailand’s mobile phone providers climbed after the country’s telecommunications regulator announced a plan to auction licenses to provide high-speed services by year-end. Advanced Info Service Pcl, the largest, rose 2.1 percent to 97 baht. Total Access Communication Pcl, the second biggest, jumped 5.7 percent to 41.75 baht.

In Seoul, Daewoo rose 13 percent to 20,950 won, while Hyundai Heavy Industries Co., the world’s biggest shipyard, jumped 4.6 percent to 195,500 won.

“There are expectations that the partners in the Gorgon gas project in Australia will select the winners to build facilities this month,” said Lee Jae Won, an analyst at Tong Yang Investment Corp. in Seoul. “There is talk that Daewoo Shipbuilding and Hyundai Heavy may be the winners in the bid.”

Unicom, Paladin

Liquified natural gas exports from Gorgon, Australia’s largest resources project, may be valued at A$300 billion over 20 years, Prime Minister Kevin Rudd said on Sept. 1.

Unicom, China’s No. 2 mobile-phone carrier, climbed 3.2 percent to HK$11.06. Goldman Sachs raised its rating on the stock to “buy” from “neutral” because the introduction of so-called commercial WCDMA services in 285 cities this month will allow Unicom to increase its market share.

Paladin, a uranium producer with mines in Africa and projects in Australia, slumped 3.1 percent to A$4.75 after raising A$419 million ($360 million) in a share sale to fund acquisitions and exploration.

In Hong Kong, Wing Hang Bank Ltd., one of the city’s four publicly traded family-run banks, added 2.5 percent to HK$74.95 on takeover speculation after the company said it has been approached by third parties.

Brother Industries Ltd. climbed 6.3 percent to 1,092 yen, set for the highest close since October 2008. Executives at rival Lexmark International Inc., the second-largest U.S. printer maker, said at a conference yesterday that most segments of the company’s business grew in the second quarter.

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