Asian stocks rose for a fourth year, the longest winning streak in almost two decades, and may increase in 2007 as consumer spending picks up in Japan and China, the region’s two biggest economies.
Stock benchmarks in China, Hong Kong, India and Indonesia set new highs in December, helping push MSCI Asia-Pacific Index excluding Japan up 29 percent this year. Slowing growth in Japan made the Topix index the worst performing gauge among the world’s 10 largest markets. The MSCI index that includes Japan climbed 15 percent, behind Europe and the U.S.
JPMorgan Chase & Co. and Goldman Sachs Group Inc. predict Japan will join the rally next year as rising salaries help reverse a slump in household spending. Consumers are spending more in China, where the economy is growing faster than 10 percent and the government is raising minimum wages and welfare payments.
“Both Japan and China doing well is going to drag more money into Asia,” said Donald Gimbel, who manages $2 billion at Carret & Co. in New York. “Things are very positive.”
The MSCI Asia-Pacific Index’s rise this year was less than the 13.6 percent increase in the Standard & Poor’s 500 Index and the 31 percent gain in dollar terms for the Dow Jones Stoxx 600 Index of European companies. Even so, four consecutive years of gains in Asia is the longest stretch since calculations began in 1988. Japanese stocks account for more than 40 percent of the regional index’s value.
Demand from China and India, the world’s fastest-growing major economies, helped spur increases across Asia. Energy companies had the biggest advance, as their MSCI index climbed 31 percent.
Asian stocks outside of Japan probably will deliver 20 percent returns next year, said Timothy Moe, a Hong Kong- based strategist at Goldman. U.S. and European stocks may have smaller gains, according to surveys of strategists by Bloomberg News.
Concern this year that higher energy and borrowing costs would dampen spending in the U.S., Asia’s largest export market, caused swings in share prices. The MSCI Asia-Pacific retreated 19 percent from its May 8 peak to its June 13 low, the biggest decline since 2002.
The benchmark climbed 21 percent since then as oil prices fell from records and the U.S. Federal Reserve stopped raising interest rates after 17 straight increases.
Gains in Japanese stocks were capped as the world’s second-largest economy flagged. Growth slowed in the second and third quarters, and the most recent period was the weakest since 2004.
