By Adam Haigh & Jonathan Burgos - Sep 16, 2013 2:41 PM GMT+0400
Asian stocks rose after Lawrence Summers withdrew from consideration to be the next Federal Reserve chairman, paving the way for Janet Yellen, who some investors say may favor a slower reduction in U.S. stimulus.
The MSCI Asia Pacific excluding Japan Index increased 1.7 percent to 464.84 as of 6:30 p.m. in Hong Kong, its highest close since May 30. More than three shares rose for each that fell on the gauge, which climbed 5 percent this month through last week. Futures on the Standard & Poor’s 500 Index jumped 1.1 percent.
Sept. 16 (Bloomberg) -- Sean Darby, chief global equity strategist at Jefferies Group Inc. in Hong Kong, talks about the outlook for global markets and his investment strategy. He speaks with John Dawson on Bloomberg Television's "On the Move." (Source: Bloomberg)
Sept. 16 (Bloomberg) -- Ric Spooner, chief market analyst at CMC Markets in Sydney, talks about Federal Reserve monetary policy leadership change and its effect on markets, and Reserve Bank of Australia monetary policy He speaks with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)
Summers withdrew his nomination to lead the Fed before a two-day policy meeting starting tomorrow at which the central bank is forecast to reduce monthly stimulus, known as quantitative easing. Summers, a former treasury secretary, would tighten Fed policy more than Yellen, who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll of investors, analysts and traders last week.
“It’s quite positive for equities,” George Boubouras, Melbourne-based chief investment officer at Equity Trustees Ltd., where he helps oversee about $28 billion, said by telephone. “It puts Yellen back on the cards as the favorite. She’s more aligned to retaining accommodative policy and is seen as not being as brash as Summers might have been.”
Regional Gauges
South Korea’s Kospi (KOSPI) index gained 1 percent and Australia’s S&P/ASX 200 Index rose 0.5 percent to close at a five-year high. New Zealand’s NZX 50 Index increased 0.9 percent to a record close. Singapore’s Straits Times Index jumped 1.9 percent. Taiwan’s Taiex index surged 1.4 percent and Hong Kong’s Hang Seng Index climbed 1.5 percent. China’s Shanghai Composite Index slipped 0.2 percent. Japanese markets are closed for a holiday.
Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, jumped 5.1 percent in Sydney as the bullion’s price rose. Tencent Holdings Ltd., China’s biggest Internet company, rose 2.5 percent to a record in Hong Kong. SK Hynix (000660) Inc., the world’s No. 2 maker of computer-memory chips, gained 2.8 percent in Seoul after a report that U.S. rival Micron Technology Inc. is cutting its production by about 30 percent.
Summers’ announcement comes one day ahead of a meeting at which Fed policy makers will taper $85 billion in monthly bond-buying by $10 billion, according to the median forecast of economists in a Bloomberg News survey.
“I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation’s ongoing recovery,” Summers wrote in a letter to President Barack Obama.
Three Choices
Obama said in a statement that he accepted Summers’s decision and praised his former economic adviser.
Summers, 58, was one of three names that Obama had mentioned as possible replacements for Bernanke, whose term as Fed chairman ends on Jan. 31. Yellen, 67, the current Fed vice chairman, was also on Obama’s candidate list along with Donald Kohn, 70, a former Fed vice chairman, the president said earlier. Summers until today was the president’s favorite.
Fifty-seven percent of investors surveyed in a Bloomberg Global Poll say they don’t expect a sudden change in the markets if the Fed cuts its bond purchases because they already anticipate tapering action.
The U.S. is seeking support from its allies to confiscate Syria’s chemical arsenal after forging an agreement with Russia over the weekend.
Assad Deadline
U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov agreed on a framework for finding, securing and destroying Syrian President Bashar al-Assad’s stock of poison gas. The deal calls for early signs of progress, giving Assad one week to submit an inventory of his toxic weapons, and calls for initial inspections in Syria by November.
“We have a supportive environment for risk assets today,” Mark Lister, the head of private wealth research at Craigs Investment Partners Ltd. in Wellington, said by telephone. “We have some sort of proposal to avoid military action on Syria, and so that adds to the positive tone. Summers wasn’t really favored by the market as he was seen as higher risk, that he might change strategy, be less supportive” of quantitative easing.
The MSCI Asia Pacific Index excluding Japan has risen for three straight weeks as data showedChina’s economy is picking up. The gauge was valued at 12.6 times estimated earnings on Sept. 13, compared with a multiple of about 15.3 for the S&P 500 and 14.2 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Gold Producers
Gold producers advanced after the bullion climbed as much as 0.8 percent, heading for a second day of gains. Newcrest Mining jumped 5.1 percent to A$12.63 in Sydney. Zhaojin Mining Industry Co. rose 6.1 percent to HK$6.83 in Hong Kong. Zijin Mining Group Co. (2899), China’s largest gold producer, climbed 3.9 percent to HK$1.89.
Tencent (700) gained 2.5 percent to HK$421.20 in Hong Kong. Barclays Plc reiterated its overweight rating on the stock and raised its share-price forecast by 16 percent to HK$450, saying the company is well-positioned to benefit from growing usage of mobile Internet.
SK Hynix added 2.8 percent to 29,800 won in Seoul. Micron Technology, the largest U.S. maker of computer-memory chips, is reducing capacity by about 30 percent as it shifts some production to NAND flash memory, which are used in mobile devices such as smartphones and tablets, Taipei-based DigiTimes reported, citing a supplier it didn’t identify.
Korean Air Lines Co., the country’s biggest carrier, jumped 9.3 percent to 36,600 won in Seoul, the most since October 2011, on the first day of trading after being split into two companies.
Taiwan Semiconductor Manufacturing Co. (2330), the world’s largest contract manufacturer of chips, rose 2.9 percent to NT$105.50 in Taipei. Overseas investors bought 3.35 million more of the company’s shares than they sold on Sept. 14, the biggest foreign net purchases among Taipei-listed shares, according to data from the Taiwan stock exchange.
To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net
