Barefoot Investor: Asian Stocks Rise as Germany, France Say Greece’s Future is in Euro Area

Asian stocks climbed, with the regional benchmark index rebounding from its lowest level in more than a year, after French President Nicolas Sarkozy and German Chancellor Angela Merkel said Greece will stay in the euro zone.

Commonwealth Bank of Australia (CBA), the nation’s largest lender by market value, gained 1.3 percent in Sydney. Samsung Electronics Co., which receives 20 percent of its revenue from Europe, rose 3.1 percent in Seoul. S-Oil Corp. (010950), which refines and sells petroleum, surged 10 percent. Chipmaker Elpida Memory Inc. (6665) jumped 7.1 percent in Tokyo after saying it may shift some domestic production overseas to counter a strong yen. Taiwan Semiconductor Manufacturing Co. advanced 3.4 percent on higher dynamic random-access memory chip prices.

“Germany and France’s commitment to continue supporting Greece’s European Union membership diminishes the likelihood that it will be allowed to default,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “If Greece avoids default, it lessens any flow-on impact through the global banking system, which in turn is positive for Asian stocks.”

The MSCI Asia Pacific Index gained 1.3 percent to 117.78 as of 12:44 p.m. in Tokyo. All 10 industry groups on the measure rose, with about seven stocks gaining for every two that declined. The index yesterday fell to its lowest level since Aug. 25 last year. Concern the global economy was slipping back into a recession amid a worsening European-debt crisis triggered a 17 percent plunge in the MSCI Asia Pacific Index between this year’s high on May 2 and yesterday.
Greece and Europe

Japan’s Nikkei 225 Stock Average climbed 1.6 percent. South Korea’s Kospi Index rose 1.8 percent and Australia’s S&P/ASX 200 Index advanced 1.3 percent in Sydney. Hong Kong’s Hang Seng Index added 0.5 percent, while China’s Shanghai Composite Index was little changed.

Futures on the Standard & Poor’s 500 Index lost 0.2 percent today. In New York, the index advanced for a third day, rising 1.4 percent yesterday. Sarkozy and Merkel are “convinced” Greece will remain in the euro area, according to a statement issued by Sarkozy after they spoke to Greek Prime Minister George Papandreou by telephone.

Stocks also rose after U.S. Treasury Secretary Timothy F. Geithner said “there is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market.” At a meetings with European Union finance ministers on Sept. 16, Geithner will likely urge European governments to step up their crisis-fighting efforts.
Banks Gain

Commonwealth Bank of Australia gained 1.3 percent to A$44.55. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest publicly traded lender, rose 1.5 percent to 330 yen in Tokyo.

Financial shares provided the biggest support to the MSCI Asia Pacific Index as a group. Consumer discretionary stocks posted the second-biggest gain on the measure, rising 1.6 percent.

Samsung Electronics rallied 3.1 percent to 776,000 won in Seoul, the biggest boost to the MSCI Asia Pacific Index. Toyota Motor Corp. (7203), the world’s largest carmaker, gained 2 percent to 2,687 yen, while Honda Motor Co., which receives about 80 percent of its revenue from outside Japan, jumped 3.5 percent to 2,376 yen.

“We’re seeing some risk-on trading on hopes that the European issue will be pushed further down the road,” said Belinda Allen, senior analyst of investment markets research at Colonial First State Global Asset Management in Sydney, which oversees about $150 billion. “Despite the comments from the French and German leaders, Europe still has a lot of issues to work through that will impact markets over coming months.”
S-Oil, Elpida

S-Oil surged 10 percent to 120,000 won in Seoul as prices of paraxylene, used in synthetic fibers, gained ahead of winter season, according to Cho Seung Yeon, an analyst at HMC Investment Securities Co. The stock posted the biggest gain on the MSCI Asia Pacific Index.

Elpida jumped 7.1 percent to 575 yen. The company said it plans to shift some production from Japan to Taiwan as part of a plan to deal with a strong yen and an industry slump. Goldman Sachs Group Inc. said in a report today that the shift overseas by Elpida may help cut an surplus in dynamic random-access memory chips, which would be positive for DRAM prices.

Chipmakers boosted information technology stocks to the biggest gain among the 10 industry groups on the MSCI Asia Pacific Index after DRAM prices jumped. Taiwan Semiconductor Manufacturing advanced 3.4 percent to NT$69.5 in Taipei, and Hynix Semiconductor Inc. rose 5.5 percent to 20,950 won in Seoul.

The price of DDR3 2-gigabit dynamic random-access memory jumped 8.9 percent at yesterday’s close, the most since Jan. 28, according to data by TrendForce Corp.’s DRAMExchange.

The MSCI Asia Pacific Index declined 16 percent this year through yesterday, compared with a 5.5 percent drop by the S&P 500 and a 19 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.6 times estimated earnings on average, compared with 11.9 for the S&P 500 and 9.4 times for the Stoxx 600. (Bloomberg)


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