Asian Stocks Rise on Profit Optimism; Nippon Steel, JFE Climb

June 11 (Bloomberg) -- Asian stocks rose, led by steelmakers and energy companies, on speculation industry profits will improve as the global recovery takes hold.

Nippon Steel Corp. jumped 5.7 percent in Tokyo after the Nikkei newspaper reported the company is restarting some idled capacity. China Petroleum & Chemical Corp., the country’s biggest refiner, gained 3.7 percent in Hong Kong as a unit forecast a return to profit. KDDI Corp., Japan’s No. 2 mobile- phone carrier, sank 3.7 percent, leading declines by phone stocks and utilities on speculation investors are shifting funds to companies more likely to benefit from economic growth.

“The outlook for commodities is getting brighter as the economic data improves, especially out of China,” said Nader Naeimi, an investment strategist at AMP Capital Investors in Sydney, which manages about $95 billion. “Asian markets should benefit as economic activity picks up steam and regional trade improves.”

Five stocks declined for every four that rose on the MSCI Asia Pacific Index, which gained 0.6 percent to 105.12 as of 1:37 p.m. in Tokyo. The gauge has climbed 49 percent from a five-year low on March 9, taking valuations of its companies to the highest in more than eight months.

Japan’s Nikkei 225 Stock Average was little changed as the government said gross domestic product shrank at a 14.2 percent annual pace last quarter. South Korea’s Kospi Index gained 1 percent. Australia’s S&P/ASX 200 Index added 0.7 percent.

Taiwan Semiconductor Manufacturing Co., the world’s largest supplier of made-to-order chips, sank 0.9 percent in Taipei after saying sales slumped last month.

Higher Yields

Futures on the Standard & Poor’s 500 Index added 0.5 percent. The gauge lost 0.4 percent yesterday, led by financial companies, as yields on 10-year Treasury notes climbed to the highest level in eight months. Russia’s central bank may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, Alexei Ulyukayev, the bank’s first deputy chairman, said yesterday.

The three-month stock rally has driven the average valuations of companies on the MSCI Asia Pacific Index to 1.5 times the book value of assets, the highest since Sept. 26. Analyst profit forecasts have been increasing since the end of March, according to data compiled by Bloomberg.

Nippon Steel climbed 5.7 percent to 393 yen, while JFE Holdings Inc. rose 4.3 percent to 3,370 yen. Kobe Steel Ltd. added 4.9 percent to 193 yen. The three steelmakers are restarting some idled capacity because output at automakers and other manufacturers has hit bottom, the Nikkei reported.

High Valuations

“There are expectations the economy will start to recover later this year and stocks will climb even further,” said Mitsushige Akino, who oversees about $560 million at Ichiyoshi Investment Management Co. in Tokyo. “As valuations are high, optimism alone isn’t enough for investors to buy more.”

Companies on Japan’s Nikkei traded at 42.5 times estimated profit for this fiscal year, the highest level in almost a month, according to gauge compiler Nikkei Inc. The 25-day Toraku index, a measure of daily stock winners and losers in Tokyo, jumped to 135.32 yesterday, above the 130 level that some traders use as a signal to sell.

China Petroleum, known as Sinopec, climbed 3.7 percent to HK$5.93. The company’s Sinopec Shanghai Petrochemical Co. unit said it expects to post a profit for the first half of 2009, compared with a net loss for the same period last year.

Sinopec Shanghai jumped 8.1 percent to HK$2.82 in Hong Kong.

‘Defensive’ Stocks

KDDI fell 3.7 percent to 493,000 yen, while smaller rival Softbank Corp., the sole provider of Apple Inc.’s iPhone in Japan, slid 1.6 percent. CLP Holdings Ltd., Hong Kong’s biggest power utility, sank 0.6 percent to HK$51.80.

Telecommunication companies and utilities are in so-called defensive sectors that are considered to be relatively insulated against an economic downturn. The two industries were the best performing of the MSCI Asia Pacific Index’s 10 groups at the height of the credit crisis in the fourth quarter of 2008.

“People are shifting to cyclical shares from defensive ones on expectations the global economy will recover,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co. in Tokyo, which oversees about $88 billion.