Asian Stocks Advance on Weaker Yen, Brokerage Recommendations

By Patrick Rial and Adam Haigh

Oct. 13 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a 13-month high, as a weaker yen lifted Japanese automakers and brokerage recommendations boosted steelmakers and banks.

Toyota Motor Corp., which gets 74 percent of its revenue outside Japan, rose 3.1 percent as the yen traded near the lowest level in more than two weeks against the euro. JFE Holdings Inc., Japan’s No. 2 steelmaker, surged 6.1 percent after Goldman Sachs Group Inc. added the stock to its “conviction buy” list. Commonwealth Bank of Australia climbed 2.3 percent as Bank of America Corp.’s Merrill Lynch unit advised buying the stock.

The MSCI Asia Pacific Index rose 0.7 percent to 119.34 at 1:48 p.m. in Tokyo, set to close at the highest level since Sept. 8, 2008. The measure has climbed 69 percent from a five-year low on March 9 as Japan exited recession and growth accelerated in countries from China to Indonesia.

“Markets continue to rise at such a rate and you’re always looking for rotation into the next thing that hasn’t moved yet,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “You’re probably going to get a number of false starts as people try to pre-empt a recovery that probably isn’t there yet, or is at best muted.”

Japan’s Nikkei 225 Stock Average rose 0.4 percent to 10,055.15. Australia’s S&P/ASX 200 Index gained 1 percent, while China’s Shanghai Composite Index added 0.8 percent.

Higher Forecast

Hong Kong’s Hang Seng Index advanced 1.8 percent as Shenguan Holdings Group Ltd., which makes sausage skins, soared 53 percent in its trading debut. Geely Automobile Holdings Ltd. jumped 6.8 percent after saying it doubled September sales.

Futures on the Standard & Poor’s 500 Index expiring in December were little changed at 1,071.80. The gauge advanced 0.4 percent to 1,076.19 yesterday, the highest since Oct. 3, 2008, as Black & Decker Corp. boosted its earnings forecast and Ford Motor Co. reported higher European sales.

“It seems investors are still happy to bid the market higher heading into the bulk of the reporting period,” said Ben Potter, a research analyst at IG Markets in Melbourne. “They’re taking confidence from earnings upgrades, with the latest being Black & Decker.”

Toyota, the world’s largest automaker, added 3.1 percent to 3,630 yen on speculation the weaker yen will boost the value of overseas sales repatriated back to Japan.

Chinese Automakers

Nissan Motor Co., which got 34 percent of its revenue in North America last fiscal year, gained 2.2 percent to 688 yen. The yen traded at 132.70 per euro from 132.72 yesterday, when it touched 133.32, the weakest level since Sept. 25.

China’s SAIC Motor Corp. and Chongqing Changan Automobile Co. rose after saying they probably posted higher profits for the third quarter. SAIC Motor, China’s largest carmaker, gained 1.3 percent to 20.88 yuan. Changan Automobile, a partner of Ford and Mazda Motor Corp., advanced 2.1 percent to 11.36 yuan.

In Hong Kong, Geely Automobile Holdings Ltd., the Chinese carmaker backed by Goldman Sachs, climbed 6.8 percent to HK$2.52 after sales last month doubled to 32,053 vehicles.

JFE Holdings climbed 6.1 percent to 3,310. Nippon Steel Corp., the world’s second-largest steelmaker, added 6.2 percent to 358 yen. Goldman raised Nippon Steel to “buy” from “neutral.”

“We are turning maximum bullish on Asian steel and on Japan in particular,” a team of analysts led by Rajeev Das at Goldman Sachs wrote in a report. “We expect Asian steel demand to surprise on the upside in 2010 -- mainly due to rising steel intensity of Asian economies.”

Best Performers

Raw-material and energy shares are the MSCI Asia Pacific Index’s best performers in the past three months on optimism a global economic recovery will boost commodities demand. Signs of growth contributed to an unexpected increase in Australian interest rates last week, while reports showed U.S. jobless claims fell and retail sales rose.

Rio Tinto Group climbed 1.4 percent to A$62.15 as a measure of six metals traded on the London Metal Exchange, including copper and zinc, added 1.1 percent yesterday.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 1 percent to A$51.83, as crude traded at $73 a barrel in New York in after-hours trading, after settling yesterday at a seven-week high of $73.27.

“At this moment, it’s very easy for risk money to flow into the commodities and equity markets,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Materials shares are likely to be snapped up.”

Broker Upgrade

The stock rally since March has driven the average price of shares on the MSCI Asia Pacific Index to 1.57 times book value, up from 1.03 times at the market’s low in March, according to data compiled by Bloomberg.

Financial shares were led higher by Commonwealth Bank of Australia as Merrill Lynch raised its recommendation on the shares to “buy” from “neutral.” The stock is now the brokerage’s “preferred exposure” among Australia’s banks, analysts led by Matthew Davison wrote in a note to clients.

Commonwealth Bank gained 2.3 percent to A$53.85. National Australia Bank Ltd. rose 1.6 percent to A$31.52.

In Hong Kong, Shenguan jumped 53 percent to HK$4.75 on its first day of trading. The company sold 400 million shares at HK$3.10 each in its initial share sale, generating net proceeds of HK$1.15 billion ($148 million), according to a statement.

Slot Machines

Hong Kong-listed casino operators SJM Holdings Ltd. and Melco International Development Ltd. dropped after Macau said it’s reviewing the size of the casino industry and that the six license holders agree it “shouldn’t expand infinitely.”

The region’s government may limit slot-machine locations and raise the age for customers and staff to 21, according to a statement.

SJM, billionaire Stanley Ho’s casino holding company, lost 3.9 percent to HK$4.42. Melco International, controlled by Ho’s son Lawrence, fell 3.5 percent to HK$4.97.

In Australia, Macquarie Media Group slumped 5.2 percent to A$2.21. Preliminary estimates of the company’s American Consolidated Media LLC unit earnings for the quarter ended Sept. 30 indicate the company may breach a loan covenant, Macquarie Media said in a statement.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Adam Haigh in Hong Kong at ahaigh1@bloomberg.net.