Asia Stocks Rise Most in Two Months; Bank Losses Cap Gains

By Richard Frost and Shani Raja

July 26 (Bloomberg) -- Asian stocks climbed the most in two months this week as commodities prices fell. Gains were capped after National Australia Bank Ltd. said credit losses may surge and Samsung Electronic Ltd.'s profit missed estimates.

Cathay Pacific Airways Ltd. rose as oil dropped for a second week. Bridgestone Corp., the world's largest tiremaker by sales, surged the most since March after rubber traded near a seven-week low. National Australia, the country's biggest bank, and Australian & New Zealand Banking Group Ltd. plunged yesterday by the most since the October 1987 stock market crash. Samsung, Asia's largest maker of flat screens, tumbled in Seoul.

``Volatility is high; one day investors feel good and the next day you get a writedown,'' said Nader Naeimi, a Sydney- based senior investment strategist at AMP Capital investors, which manages about $108 billion. ``There's a lack of trust.''

The MSCI Asia Pacific Index rose 3.0 percent to 132.98, the biggest weekly advance since the five days to May 16. Nine of the index's 10 industry groups climbed this week, except for energy shares.

Japan's Nikkei 225 Stock Average added 4.2 percent, snapping a six-week losing streak. Japan was shut on July 21 for a holiday. All other Asian benchmark indexes rose.

MSCI's Asian index rallied 5.9 percent in the first four days of the week, after closing the previous week at its lowest level since October 2006, as concerns eased that bank losses will expand and oil tumbled from a record. The gauge fell 2.5 percent yesterday, the most in six weeks, on renewed speculation losses tied to U.S. mortgages will widen after a report showed sales of previously owned homes slipped to the lowest level in a decade.

Bear Market

The benchmark index is down 15 percent this year, part of a rout that has erased more than $13 trillion from equities worldwide since October as accelerating inflation and $468 billion in writedowns and credit-related losses threaten to push the U.S. into recession.

Except for Canada, all of the 23 developed markets in the MSCI World index experienced bear market plunges of at least 20 percent this year.

Cathay Pacific, Hong Kong's biggest airline, gained 2.4 percent to HK$15.50, capping a three-week, 11 percent advance. China Southern Airlines Co., the nation's largest carrier, jumped 13 percent to HK$3.60, its biggest advance since the five days to April 25.

Oil prices declined 4.4 percent this week, after dropping as much as 16 percent below its July 11 record of $147.27, on signs of falling demand in the U.S.

Oil Producers

Woodside Petroleum Ltd., Australia's second-largest oil and gas producer, fell 5.9 percent to A$52.21, capping a 22 percent, four-week slump. The stock is still up 3.6 percent for the year, compared with a 22 percent decline on Australia's benchmark S&P/ASX 200 Index.

Inpex Holdings Inc., the biggest Japanese oil explorer, dropped 6.6 percent to 1.056 million yen.

A measure of energy stocks has lost 9.2 percent this month, the most among the 10 industry groups, as the stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption.

Bridgestone gained 6 percent to 1,809 yen, the biggest advance in four months, while Yokohama Rubber Co., Japan's second-largest tiremaker, added 9.2 percent to 519 yen, the most since April 2004, after natural rubber futures in Tokyo dropped to the lowest in seven weeks on July 24. JSR Corp., a maker of synthetic rubber, gained 4.6 percent to 1,922 yen, after saying profit increased on higher product prices.

Credit Losses

National Australia dropped 1.7 percent to A$26.56, after slumping 13 percent yesterday. The Melbourne-based company said it has set aside funds amounting to 90 percent of the value of its A$1.2 billion ($1.1 billion) of collateralized debt obligations. National Australia took a A$181 million provision in March.

Australia & New Zealand Banking, which increased bad-debt provisions by 71 percent in April, lost 2.5 percent to A$17.75, after plunging 8.7 percent yesterday.

Concern that banks may report wider credit-market losses led to a 4 percent decline in Asian financial shares yesterday. Bank stocks advanced 9 percent in the previous four days after Citigroup Inc. and JPMorgan Chase & Co. reported results that topped analyst estimates and Deutsche Bank AG said financial companies are overcoming credit losses.

Samsung lost 1 percent to 576,000 won. The stock tumbled 6.2 percent yesterday, the most since June 2004, after net income in the second quarter climbed 51 percent to 2.14 trillion won ($2.1 billion), missing the 2.36 trillion won median estimate in a Bloomberg analyst survey. Profit from chips unexpectedly fell and losses at the consumer electronics division more than doubled.

To contact the reporters for this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.