Asian stocks touched a three-year high on Tuesday, powered by a record busting Bull Run on Wall Street. Monetary stimulus from the ECB, policy measures from China’s government and optimism generated by the results of the Indian elections were other factors which contributed to the rise of indices across the region. These include the MSCI Asia Pacific Index, the Shanghai Composite Index, the Hang Seng and the Sensex. Only the Nikkei edged downward, succumbing to profit taking.
Record Highs on Wall Street
On Monday, the Dow closed at a record level for the ninth time this year. The S&P 500 also ended on a high, the nineteenth one for the year. This was the third successive record close for the blue-chip index and the fourth successive high for the S&P 500. Gains made by small-cap stocks and major acquisitions propelled stocks upward on Monday.
But the major positive recently was the non-farm payrolls report released on Friday. Total nonfarm payroll employment jumped 217,000 in May, more than the consensus estimate of a rise by 213,000. The unemployment rate remained flat at 6.3%.
ECB’s Monetary Stimulus
The ECB reduced its key interest rates. The refinancing rate was lowered to 0.15% from 0.25% and the marginal lending facility rate was reduced to 0.40% from 0.75%. ECB also cut the deposit rates to minus 0.10%, thereby becoming the first central bank to have a negative rate.
Additionally, ECB deployed a series of targeted long term refinancing operations in an effort to boost bank lending to the non-financial private sector in the Eurozone. The ECB also announced that it will halt sterilizing purchases under its Securities Market Program.
Chinese Stocks Gain
The Shanghai Composite Index gained 1.1% on Tuesday after the Chinese central bank announced measures to increase lending to smaller companies. Reserve requirements were reduced to inject liquidity into the economy.
Meanwhile, the China Securities Regulatory Commission allowed several first time share sales. These factors helped the benchmark move up to its highest level in nearly a month. The rise in export figures for May, announced earlier this week has also provided impetus to the capital markets.
Indian Markets Maintain Highs
Benchmarks ended nearly flat, but remained above key levels on Tuesday as investors were dogged by fears of a lower-than-average monsoon. Tech shares led a late recovery which helped markets recover from early profit booking. The Sensex ended above the 25,000 mark, holding on to the impetus gained from recent electoral results.
Taken together, these factors indicate a positive period for Asian stocks going forward. Below we present three stocks which possess the potential to grow in such an environment, each of which also has a good Zacks rank.
Noah Holdings Limited (NOAH) is engaged in providing independent services, primarily the distribution of wealth management products to the high net worth population in China through its subsidiaries. It distributes over-the-counter wealth management products including fixed income products and private equity funds. The company’s headquarters are located in Shanghai.
Noah Holdings Limited holds a Zacks Rank #2 (Buy). The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 11.63.
LG Display Co., Ltd. (LPL) formerly known as LG Philips LCD Co., Ltd., primarily manufactures and sells thin film transistor liquid crystal display (TFT-LCD) panels. The company supplies its products to original equipment manufacturers and multinational corporations. LG Display offers TFT-LCD panels primarily for use in televisions, notebook computers, and desktop monitors. The company’s headquarters are located in Seoul, South Korea.
Currently the company holds a Zacks Rank #1 (Strong Buy) and has a P/E (F1) of 11.51.
HDFC Bank Ltd. (HDB) is now one of the largest banks in India, with a retail network of 3,336 branches and 11,473 ATMs in 2,022 cities as of Dec 31, 2013. The bank enjoys favorable brand equity among Indian consumers and depositors, which enables it to keep its borrowing costs low.
Apart from a Zacks Rank #2 (Buy), HDFC Bank has a P/E (F1) of 20.57.
A variety of regional and global factors are providing new impetus to Asian markets in recent times. This is why these stocks would make good additions to your portfolio.