Asia Stocks Recover From Biggest Weekly Drop Since August

By Adam Haigh 

Asian stocks rose, with the regional benchmark gauge recovering from its biggest weekly drop in seven months, after Cyprus agreed to an international bailout and profit at China Petroleum & Chemical Corp. (386) topped forecasts.

Sony Corp. gained 1.6 percent as the yen weakened, boosting the outlook at Japan’s No. 1 consumer-electronics exporter. Sinopec, as Asia’s biggest refiner is known, rose 3.3 percent after net income beat analyst estimates. Leighton Holdings Ltd. (LEI) surged 4.1 percent as Australia’s largest construction company appointed Bob Humphris chairman after his predecessor resigned in a dispute with shareholder Hochtief AG over board independence. The MSCI Asia Pacific Index (MXAP) advanced 1 percent to 135.61 as of 1:31 p.m. in Tokyo. All 10 industry groups climbed. Futures on the Standard & Poor’s 500 Index rose 0.4 percent. The provisional deal makes Cyprus the fifth country to tap a rescue since the euro debt crisis broke out in Greece in 2009.

“Markets are beginning to assume that with these mini crises coming out of Europe, a resolution is always found,” Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion, said by phone. “That’s good news.”

Japan’s Nikkei 225 Stock Average added 1.9 percent, with the measure trading near the highest level since September 2008. Australia’s S&P/ASX 200 Index increased 0.6 percent, while South Korea’s Kospi Index gained 1.3 percent. Trading volumes in Japan and Australia were more than 30 percent below the 30-day average for the time of day.

Lagging Performance

Hong Kong’s Hang Seng Index (HSI) added 0.7 percent andChina’s Shanghai Composite slid 0.2 percent. Almost three shares rose for each that declined on Hong Kong’s benchmark gauge, which was the developed world’s worst-performing measure this year through March 22.

The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area. The deal paves the way for 10 billion euros ($13 billion) of emergency loans and moves Cyprus toward eliminating the threat of default and lessens the chance of a disorderly exit from the shared currency.

Sony gained 1.6 percent to 1,687 yen, while Toyota Motor Corp. (7203) advanced 1.4 percent to 4,950 yen. The yen fell 0.4 percent to 94.85 against the dollar. Bank of Japan Governor Haruhiko Kuroda will appear in parliament tomorrow to speak about monetary policy. He said last week at his inaugural press conference as the central bank chief that he’ll do whatever it takes to achieve a 2 percent inflation target.

Cyprus Concern

The MSCI Asia Pacific Index last week posted its biggest decline since the period ended Aug. 31, amid concern that an unprecedented levy on bank deposits in Cyprus may be a sign of deepening crisis in Europe. The gauge rallied 12 percent through March 22 from mid-November as improving economic data from the U.S. and speculation that Japan will deploy more stimulus countered concern China will move to cool its property market.

Asia’s benchmark trades at 15 times average estimated earnings, compared with 14.1 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

“The uncertainty is out of the way,” Binay Chandgothia, Hong Kong-based fund manager at Principal Global Investors, which oversees more than $280 billion, said in a Bloomberg Television interview. “Stick to equities. We’re looking to add” to an overweight position on Asian shares, he said.

China Earnings

Sinopec climbed 3.3 percent to HK$9.04 as the energy company reported net income of 63.9 billion yuan ($10.3 billion), more than the 61.8 billion yuan mean of 26 analysts’ estimates compiled by Bloomberg.

China Construction Bank Corp., the world’s second-largest lender by market value, increased 2.1 percent to HK$6.30 after fourth-quarter profit surpassed expectations on loan growth.

Emerging market stocks are posting their worst first quarter since 2008 and are lagging shares of developed economies by the most in 15 years. The MSCI Emerging Markets Index (MXEF)trades for 10 times analysts’ 12-month profit estimates, against 13 times for the MSCI World Index, the widest gap since November 2008, according to data compiled by Bloomberg.

Leighton advanced 4.4 percent to A$21.08 after the appointment of Humphris, the former managing director of Peabody Energy Corp. (BTU)’s local unit and a director of Australian Infrastructure Fund Ltd.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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