Asian stocks rose after United Overseas Bank Ltd (大華銀行) and the Oversea-Chinese Banking Corp’s (新加坡華僑銀行) earnings beat analyst estimates, offsetting concerns that US lenders will need more capital.
United Overseas Bank Ltd, Singapore’s second-largest lender, surged 13 percent, while Oversea-Chinese Banking Corp, which owns the city’s biggest life insurer, gained 4.6 percent. Finance companies rose even after people familiar with the matter said Bank of America Corp needed about US$34 billion in new funds.
Twice as many stocks advanced as fell on the MSCI Asia Pacific excluding Japan Index, which rose 0.8 percent to 299.67 as of 5:23pm in Hong Kong. The gauge has surged 45 percent in two months on speculation that global growth is recovering.
“Markets have been very strong in the last few weeks on a view that the worst has passed,” said Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which holds about US$90 billion in assets. “News that some of the larger banks still need to raise a fair bit of capital brings that into question.”
Singapore’s Straits Times Index climbed 5.1 percent to a seven-month high. Hong Kong’s Hang Seng Index rose 2.5 percent. Other markets in Asia advanced except Australia, South Korea, India and Vietnam. Japan’s market was closed for a holiday yesterday.
HSBC Holdings Plc, Europe’s largest bank, gained 6.3 percent in Hong Kong after it was upgraded by JPMorgan Chase & Co. Shinhan Financial Group Co, South Korea’s second-biggest financial company, slumped 6.8 percent after Citigroup Inc downgraded the stock. Harvey Norman Holdings Ltd, Australia’s largest electrical retailer, lost 3.9 percent after JPMorgan cut its recommendation on the stock.
The banks may outline their strategies to add capital, or in other cases buy out government stakes, after the Federal Reserve releases today the results of stress tests conducted on lenders’ balance sheets. Losses from the credit crisis since the start of 2007 have swelled to US$1.37 trillion, according to data compiled by Bloomberg.
“It’s hard to see a sustained recovery in the global economy until the financial system has repaired itself,” Halmarick said. “These stress tests results are telling us that we’re not quite out of the woods yet.”
Finance companies were the biggest contributor to the MSCI gauge’s advance yesterday. The shares are the second-best performing of 10 industry groups during the rally in the past two months.
United Overseas surged 13 percent to S$14.88 after posting a 23 percent slump in first-quarter profit to S$409 million (US$277 million). That was more than the S$384 million estimated by Bloomberg’s analyst survey.
Oversea-Chinese Banking added 4.6 percent to S$6.80. The company said first-quarter profit fell 12 percent to S$545 million, beating the S$297 million mean estimate of analysts surveyed by Bloomberg.
In Sydney, Westpac Banking Corp, Australia’s biggest lender by market value, gained 2.4 percent to A$19.96 even as it reported a 6 percent drop in first-half profit.
“This result will be taken well for Westpac for sure, as there were no real surprises,” said Prasad Patkar, who helps manage the equivalent of about US$800 million at Platypus Asset Management in Sydney.
HSBC climbed 6.3 percent to HK$61.60 after JPMorgan raised its recommendation to “neutral” from “underweight.”
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