Asian stocks outside of Japan rose for a third week as Chinese equities advanced amid government pledges to do more to support transition in the world’s No. 2 economy. Japanese shares retreated as the yen strengthened.
The MSCI Asia Pacific Excluding Japan Index added 1.9 percent to 447.69 this week as Chinese shares led gains. The benchmark MSCI Asia-Pacific Index, up 0.4 percent on the week, has fallen 6.2 percent from this year’s high on May 20 through Friday amid signs China’s economy is slowing and on concern the US Federal Reserve will start tapering monetary stimulus as the US economy improves.
Chinese Premier Li Keqiang’s (李克強) statement that economic growth will not fall below 7 percent “helped to reassure investors,” Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, said by telephone.
“China could introduce some kind of fiscal stimulus to help stabilize the economy. While there’s a likelihood the Fed will start tapering monetary stimulus in September, we don’t expect the Fed to start raising rates until the end of 2014. We remain overweight on equities,” Roth said.
Half of the economists surveyed by Bloomberg say the Fed will in September begin tapering its bond-buying program that has supported bond and equity gains.
Shares on the MSCI Asia Pacific Index traded at 13.2 times estimated earnings as of Friday, compared with 15.2 times for the Standard & Poor’s 500 Index and 13.5 times for the STOXX Europe 600 Index.
The Shanghai Composite Index climbed 0.9 percent this week. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong advanced 3.3 percent, its biggest weekly gain since May 10. The benchmark Hang Seng Index gained 2.8 percent.
Despite three straight days of losses, Taiwan’s TAIEX still ended up this week 1.1 percent higher at 8,149.40. Taiwanese shares closed slightly lower on Friday as old economy stocks, including petrochemicals and autos, faced follow-through selling, with investors pocketing recent gains, dealers said.
However, the tech sector appeared resilient, which prevented the broader market from falling further as smartphone camera lens supplier Largan Precision Co (大立光) posted significant gains after better-than-expected second-quarter results, they said.
“Judging from the [market’s] movement, I think technical hurdles above 8,200 points have been high. The market needs some time to consolidate before another takeoff,” Horizon Securities (宏遠證券) analyst Benson Huang (黃重善) said.
South Korea’s KOSPI also rose 2.1 percent this week, while Australia’s S&P/ASX 200 Index gained 1.4 percent and New Zealand’s NZX 50 Index increased 1 percent.
On the other hand, Japan’s TOPIX dropped 3.7 percent this week and the Nikkei 225 Stock Average sank 3.2 percent. Both gauges retreated for the first time in six weeks as the Japanese yen strengthened.
Investor attention in Japan has shifted to whether the government will cut corporate taxes, ease regulations, loosen labor laws, join the Trans-Pacific Partnership free-trade agreement and raise the sales tax, as Japanese Prime Minister Shinzo Abe’s victory in Sunday’s upper-house election gave him a freer hand to execute economic reforms.
“There’s a feeling that stocks are overheating, so after gains there’s going to be a lot of profit taking,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities, a unit of Japan’s second-biggest lender by market value. “Still, with expectations for Abenomics and Japan’s economic recovery, we probably won’t see big declines.”