Indonesian expansion lifts stocks

Indonesian stocks powered to a 14-month high on Monday as reassuring domestic growth data bolstered hopes that the country might avoid the recession that has hit many of neighbours.

The country’s economy expanded at an annual rate of 4 per cent in the second quarter, down from 4.4 per cent in the previous three months and the slowest pace for six years, but slightly more than economists had expected.

The Jakarta composite index rose 1.7 per cent to 2,389.56, as coal producer Bumi Resources climbed 7.6 per cent Rp3,200 and Astra Agro Lestari, the plantation group, jumped 9.3 per cent to Rp21,100.

The mood elsewhere in the region was more mixed.

Hong Kong took its lead from Friday’s better than expected US employment data and the Hang Seng index rose 2.7 per cent to 20,929.52, recouping all of last week’s decline.

But Shanghai slipped to its lowest close for three weeks amid lingering concerns that the Chinese authorities would move to tighten the liquidity that has driven the market’s stellar rally this year. The Shanghai Composite eased 0.3 per cent to 3,249.76.

Tokyo ended at a fresh ten-month high as exporters benefited from a weaker yen and sentiment was helped by encouraging domestic machinery orders data.

The Nikkei 225 Average gained 1.1 per cent to 10,524.26, its highest close since October 3. The broader Topix index rose 1.3 per cent to 969.24.

Exporters were among the companies leading the market higher as the yen traded at levels not seen since mid-June.

Honda gained 3.6 per cent to Y3,210, while Canon rose 2.1 per cent to Y3,480 and TDK added 3 per cent to Y5,510.

The machinery orders data – a leading indicator for capital expenditure – showed the biggest rise for more than a year in June.

Machinery maker Komatsu gained 2.9 per cent to Y1,632, while NSK, which makes ball bearings for precision machinery and autos, gained 4.9 per cent to Y558.

However, manufacturers forecast a sixth straight quarterly fall in orders in the three months between July and September.

Chiwoong Lee, an economist at Goldman Sachs wrote in a report: “We think it will take time for a halt in export declines to bring a capex recovery for two reasons: Japanese capex is heavily dependent upon export industry; and capex recovery lags export recovery by two to three quarters.”

In merger and acquisition news, Mitsubishi Rayon’s shares surged 19.8 per cent to Y327 on news Mitsubishi Chemical was considering making a tender offer to acquire the company. A local report estimated Mitsubishi Chemical would pay between Y150bn and Y200bn. Mitsubishi Chemical’s shares gained 4.7 per cent to Y443.

Daiichi Sankyo’s shares gained 2.7 per cent to Y1,818, after the company said Phase III studies for its anti-influenza virus agent showed it was as effective as Roche’s treatment Tamiflu. In Australia, Biota, which co-owns the agent, rose 5.3 per cent to A$2.17, although the broader S&P/ASX 200 index inched up just 0.1 per cent to 4,304.1.

Taipei edged ahead as cement and construction stocks attracted buyers after Typhoon Morakot hit the island. The weighted index rose 0.2 per cent to 6,882.87, with Taiwan Cement up 3 per cent at T$38.30 and Highwealth Construction 6.9 per cent higher at T$38.75.