China Stocks Erase Year’s Losses as Yen Drop Drives Japan Shares

Chinese equities rose, with a benchmark gauge wiping out losses this year, amid expectations for a recovery in the world’s second-largest economy. Japanese shares and rubber gained after the yen touched a 20-month low.

The MSCI Asia Pacific Index (MXAP) climbed 0.3 percent as of 3:29 p.m. in Tokyo as theShanghai Composite Index (SHCOMP) rose 2.8 percent and Japan’s Nikkei 225 Stock Average added 1.4 percent. The yen rallied 0.2 percent after falling to 84.96 per dollar earlier, the weakest since April 2011. Rubber futures rose 1.6 percent.

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An investor monitors stock prices at a securities exchange firm in Shanghai. Photographer: Qilai Shen/Bloomberg

China is due to release figures this week on November profit for industrial companies, following an over 20 percent surge for earnings in October. Japan’s incoming Prime Minister Shinzo Abe agreed with a coalition ally on a policy package that includes “bold monetary easing” to reach inflation of 2 percent. Japanese consumer prices excluding fresh food slid last month, economists said before data this week.

“There are growing expectations that new leaders will take measures to reform the economy and the financial system will find China new growth drivers,” said Wang Zheng, the Shanghai- based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “That’s why you see all these big-caps rallying today. The ongoing economic recovery is spurring the rebound as well.”

Property developers led gains on the Shanghai Composite Index, which slipped as much as 11 percent this year. Taiwan’s Taiex Index gained 1.3 percent. Asian markets outside of Japan, China, Taiwan, Thailand, Vietnam and Sri Lanka are closed.

Company Profits

The previous corporate earnings report from China showed a 20.5 percent surge in October from a year earlier, turning positive for the year as factory output accelerated and exports picked up following a seven-quarter economic slowdown.

Wuliangye Yibin Co. (000858) paced gains for consumer-staples companies after the 21st Century Business Herald reported that the liquor maker may raise prices next year. China Vanke Co. and Poly Real Estate Group Co., the biggest Chinese developers, gained more than 6 percent after Soufun Holdings Ltd. said it sees improvement in the property market in 2013.

Almost three stocks rose for every one that fell on MSCI’s Asian gauge, with only energy shares down among the 10 main groups on the gauge.

Japan’s Topix Index, the nation’s broadest gauge of stocks, rose 0.6 percent as Japanese markets reopened after a holiday yesterday.

Weak Yen

Abe, poised to become prime minister tomorrow after elections earlier this month, said on Fuji Television on Dec. 23 that he will consider revising the law governing the Bank of Japan if the central bank doesn’t increase its inflation target to 2 percent from 1 percent at its January meeting.

“The yen has extended losses on the back of Abe’s comments,” said Toshiyuki Kanayama, a market analyst at Tokyo- based Monex Inc. “Exporters, especially auto and high-tech shares, are going to be bought as investors expect better currency margins.”

The yen rebounded to 84.78 a dollar and gained 0.2 percent to 111.76 per euro. Japan’s so-called core inflation rate slid 0.1 percent in November from a year earlier, according to the median estimate of economists in a Bloomberg News survey before the data due on Dec. 28.

Abe’s agreement with coalition ally Natsuo Yamaguchi of the New Komeito Party also calls for a “large” extra budget for the current fiscal year to March 2013 and deregulation of the energy, environment and health care sectors. The parties agreed to seek nominal gross domestic product growth of 3 percent, without giving a timeframe for the goal.

“Japan’s Abe means business this time,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in a Twitter posting. “Trillions of yen to be printed. Weak yen, positive inflation.”

Rubber for delivery in June, the most-active by volume, gained as much as 1.7 percent to 292.40 yen a kilogram on the Tokyo Commodity Exchange.