Asian Stocks Rise to One-Year High as Investors Bet on Recovery

By Patrick Rial and Shani Raja

Sept. 17 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a one-year high, as growing investor confidence in the global recovery sent commodity prices higher and prompted Japanese steelmakers to start idled plants.

BHP Billiton Ltd., the world’s largest mining company, rose 1.5 percent in Sydney after saying steel demand will double in the next 15 years. Nippon Steel Corp., the world’s No. 2 producer of the alloy, rallied 4.1 percent after saying it will reopen a furnace. Nissan Motor Co., which gets 34 percent of its revenue in North America, jumped 3.4 percent after U.S. industrial production increased more than forecast.

“The flow of good economic news has become an avalanche,” said Shane Oliver, head of investment strategy with AMP Capital Investors Ltd., which manages about $75 billion. “Six months ago, investors were allowing for a Great Depression-type of scenario. Instead, we’re seeing clear evidence of a recovery.”

The MSCI Asia Pacific Index gained 1.2 percent to 119.04 as of 5:37 p.m. in Tokyo, the highest since Sept. 8, 2008. The gauge has climbed 69 percent from a more than five-year low on March 9 as stimulus measures around the world pulled economies out of recession. Stocks on the gauge are priced at an average 1.6 times book value, up from 1.03 times at the March low.

Japan’s Nikkei 225 Stock Average rose 1.7 percent as a survey showed the nation’s manufacturers turned optimistic for the first time in almost two years. Australia’s S&P/ASX 200 Index gained 1.4 percent.

Warren Buffett’s Suits

Leading regional gains, Hong Kong’s Hang Seng Index climbed 1.7 percent, led by clothing retailer Esprit Holdings Ltd., which rose 2.5 percent after Goldman Sachs Group Inc. recommended the shares. China’s Shanghai Composite Index advanced 2 percent. Dalian Dayang Trands Co. jumped 10 percent after billionaire investor Warren Buffett said he wears the company’s suits.

Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge climbed 1.5 percent yesterday as the Federal Reserve reported a 0.8 percent increase in factory output last month, exceeding the median estimate of economists surveyed by Bloomberg.

Raw-material producers accounted for 18 percent of the MSCI Asia Pacific Index advance today. Increasing steel use in China and emerging markets foretell rising demand for iron ore in the future, according to Vicky Binns, BHP’s head of commodity analysis. A surge in Chinese imports of coking coal is “sustainable,” she said.

BHP added 1.5 percent to A$39.59. Mitsubishi Corp., which is the world’s largest producer of coking coal in partnership with BHP, advanced 2.8 percent to 1,980 yen. Mitsui & Co., which produces iron ore, climbed 3.2 percent to 1,251 yen.

Increased Production

China Shenhua Energy Co., the nation’s largest coal producer, rose 3.4 percent to 34.74 yuan. The company said coal output in August climbed 13.3 percent from a year earlier.

Nippon Steel rose 4.1 percent to 353 yen. The company will restart the No. 2 blast furnace at its Kimitsu mill to offset lost production from a plant failure. Nippon Steel brought one of two idled blast furnaces back into operation last month as the economy began to recover from the worst recession since World War II.

JFE Holdings Inc. rallied 5 percent to 3,390 yen. Japan’s second-largest steelmaker will restart a scrap furnace as early as next month to meet a recovery in demand, a spokesman said. The steelmaker is also considering reopening a blast furnace next year should the economy continue to pick up, the Nikkei newspaper reported.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, advanced 1.5 percent to A$51.60. Aluminum Corp. of China rose 3.5 percent to HK$9.52 in Hong Kong.

Beating Estimates

Crude oil climbed 2.2 percent to $72.51 a barrel yesterday, while gold futures added 1.4 percent to a record settlement price. Copper jumped 3.2 percent in New York.

The MSCI Asia Pacific Index’s six-month rally has been driven by better-than-estimated economic reports and corporate earnings. Of 646 companies on the gauge that reported net income for the latest quarter, 226 beat analyst predictions, compared with 138 that missed.

Confidence in the world economy held at a record high in September, a Bloomberg survey of users on six continents showed, after reports suggested the recession is over and officials said they won’t rush to withdraw stimulus. The Bloomberg Professional Global Confidence Index rose to 58.54 from 58.12 in August.

“The world’s economy is continuing to improve and investor sentiment remains solid, creating resilience in global stock markets,” said Mitsushige Akino, who oversees the equivalent of $660 million at Ichiyoshi Investment Management Co. in Tokyo.

Improving Sentiment

Nissan rose 3.4 percent to 613 yen on speculation demand for its vehicles will pick up in the U.S. Toyota Motor Corp., the world’s largest automaker, added 1.9 percent to 3,780 yen.

Sentiment among large Japanese manufacturers rose to 15.5 points this quarter, the highest reading since the survey began in 2004, a joint survey by the Cabinet Office and Finance Ministry showed today. A reading above zero signals optimists outnumber pessimists.

Esprit climbed 2.5 percent to HK$50.65 after it was raised to “buy” from “neutral” at Goldman Sachs, which said more “concrete” signs of recovery in Europe and the introduction of new products may be catalysts for the stock.

Federal Reserve Chairman Ben S. Bernanke said on Sept. 15 the U.S. recession is “very likely” over, while Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said the same day his company is buying equities.

Brokerage Upgrades

Dalian Dayang jumped 10 percent to 14.67 yuan, bringing gains this week to 46 percent, as it won praise from Buffett in a video congratulating the company and Chairman Li Guilian on its 30th anniversary.

Yokogawa Electric Corp., the world’s biggest maker of electronic measuring tools, jumped 11 percent to 828 yen after Nomura Holdings Inc. boosted the stock to “neutral” from “reduce” citing a recovery in orders.

Siam Cement Pcl, Thailand’s fifth-biggest publicly traded company, added 1.8 percent to 230 baht after DBS Vickers Securities (Thailand) lifted its rating to “buy” from “fully valued,” citing an expected increase in the profit margin of its petrochemical business.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.