Asia Stocks Rise as Copper Slips Amid China Stimulus Speculation

Bloomberg News

Asian shares rose, with the regional index rebounding from its biggest two-week decline since June. Copper erased last week's gain as a preliminary Chinese manufacturing gauge unexpectedly fell, while gold and silver retreated.

The MSCI Asia Pacific Index added 0.8 percent by 11:54 a.m. in Tokyo as Chinese companies in Hong Kong increased a second day after entering a bear market last week. Standard & Poor's 500 Index futures climbed 0.1 percent. Copper dropped 0.5 percent after capping its first weekly advance since Feb. 21. Gold fell for the fifth time in six days and silver retreated 0.9 percent. Corn futures gained 0.8 percent.

A preliminary purchasing managers' index from HSBC Holdings Plc and Markit Economics was at 48.1, from a final reading of 48.5 in February, signaling a third month of contraction and coming in below the median estimate of 22 economists for a reading of 48.7. China's cabinet last week said it would accelerate already-decided growth initiatives. France, Germany, the euro zone and the U.S. also publish early indicators for March manufacturing today.

'The worse the PMI data is, the bigger the chance of stimulus so perhaps people are looking at it that way,' said Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong. (HSCEI) 'The key thing is that the government started talking about stimulus, because had they not begun floating that idea, the reaction would clearly be negative. Because we have a statement of policy intent to protect the bottom line, the negative data would probably only strengthen the resolve of those in government who want to spend more money and limit losses.'

Stocks Rally

About two stocks rose for each that fell on the Asia-Pacific equity measure, with all 10 industry groups advancing.

Hong Kong's Hang Seng Index added 1 percent amid volume that was more than twice the 30-day average for the time of day. The Hang Seng China Enterprises Index of Chinese companies listed in the city increased 1.6 percent after a 2.4 percent advance on March 21.

The CSI 300 Index (SHSZ300) of stocks in Shanghai and Shenzhen was little changed after jumping 3.4 percent on Friday, the most since September, amid speculation that China would allow some companies to use preferred shares to raise funds.

China issued rules after markets closed March 21 for a trial program allowing companies to sell preferred stock, expanding financing options for the country's banks as they seek to address tougher capital requirements. Companies will be able to issue the shares if they are included in the Shanghai Stock Exchange 50 A-Share Index, the China Securities Regulatory Commission said in a statement on its official microblog.

Policy Measures

'Weakness is broadly-based with domestic demand softening further,' Qu Hongbin, Hong Kong-based chief China economist at HSBC, said in a statement. 'We expect Beijing to launch a series of policy measures to stabilize growth.'

All but two of 33 industries on the Topix rose. The Kospi Index climbed a second day, adding 0.4 percent, while Australia's S&P/ASX 200 Index (AS51) lost 0.2 percent.

Global stocks are down 1.3 percent this month as a run of disappointing economic reports and corporate defaults in China dented the outlook for global growth. Russia's annexation of the Black Sea region of Crimea from Ukraine has also spurred losses, with the U.S. and Europe levying sanctions against businesspeople and members of President Vladimir Putin's administration. Pro-Russia forces seized two bases including a military airport in Crimea March 22.

The China data is 'reflecting a slowdown we are seeing globally,' said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. 'As long as we can see what's happening with the global economy, it's not a surprise. Obviously it's not a positive for the market, but I don't think it's a huge negative.'

Sinopec Earnings

Beijing-based Sinopec, Asia's biggest oil refiner, posted higher 2013 profit at the weekend that still trailed analysts' estimates.Sinopec reported yesterday that net income last year rose 3.4 percent to 66.1 billion yuan ($10.6 billion), below the 67.8 billion-yuan mean of 12 analysts' estimates compiled by Bloomberg.

Copper for delivery in three months retreated as much as 0.9 percent to $6,419.75 a metric ton on the London Metal Exchange and was at $6,445. The price touched $6,321 on March 19, the lowest level since July 2010.

To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net Richard Frost

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