Asian Stocks Advance, Led By Banks, on Credit-Market Outlook

By Chen Shiyin and Shani Raja

July 9 (Bloomberg) -- Asian stocks rose the most in three weeks, led by banks and industrial companies, after JPMorgan Chase & Co.'s chief executive officer said credit-market losses will ease and oil prices yesterday fell more than $5 a barrel.

Macquarie Group Ltd. led a rebound among financial stocks. Korean Air Lines Co. led carriers higher. Fanuc Ltd., Japan's No. 1 maker of industrial robots, advanced after the nation's machinery orders rose at 10 times the pace forecast by economists. Stocks pared gains after Iranian state television reported the country test-fired a missile capable of reaching Israel.

``The whole market has sold off more than is warranted,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets. ``The market has priced in a recession rather than a slowdown, and I think that's overdoing it.''

The MSCI Asia-Pacific Index added 1 percent to 131.73 at 3:15 p.m. Tokyo time, set for its largest increase since June 16. The benchmark, which slumped to its lowest since November 2006 yesterday, has dropped 17 percent this year as record oil prices and credit-related losses offset efforts by central banks to bolster confidence in financial markets.

Japan's Nikkei 225 Stock Average climbed 0.2 percent to 13,052.13, trimming an increase of as much as 1.9 percent. Benchmark indexes advanced in most other Asian markets. Futures for the U.S Standard & Poor's 500 Index declined 0.2 percent.

U.S. stocks rallied yesterday, spurring the S&P 500 to its largest gain in a month. Financial shares jumped after JPMorgan's Jamie Dimon said the ``capital side of the crisis will ease,'' and Federal Reserve Chairman Ben S. Bernanke said he may extend an emergency-loan program for investment banks into next year.

Biggest Losers

Macquarie Group, Australia's No. 1 securities firm, jumped 6.1 percent to A$48.82. The cost to protect Australian corporate bonds from default declined the most in almost three months, according to Citigroup Inc. prices, indicating investors consider credit quality has improved.

Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, climbed 2.3 percent to 955 yen. Mizuho Financial Group Inc., the third-biggest, rose 3.9 percent to 512,000 yen.

Banks also gained after the regulator for Freddie Mac and Fannie Mae, the largest U.S. mortgage-finance companies, said they have enough capital to survive a slump in the housing market and meet new accounting rules.

Credit Markets

The measure of financial companies on MSCI's Asian index has lost 21 percent this year, the biggest retreat among 10 industry groups, as the world's largest banks and securities firms posted writedowns and credit losses of about $403 billion. The financial index was valued at 12 times earnings yesterday, the cheapest since the gauge was developed on Dec. 31, 1998.

Kookmin Bank, South Korea's largest bank, rallied 2 percent to 56,100 won, rebounding from yesterday's record 8.6 percent drop. Macquarie Group raised its rating to ``outperform'' from ``neutral,'' citing the outlook for second-quarter earnings.

Airlines gained on speculation the retreat in oil will lower costs. Korean Air, South Korea's largest carrier, rose 3.5 percent to 40,000 won, its first gain since June 23. Qantas Airways Ltd., Australia's biggest, added 2.2 percent to A$3.27.

Air China Ltd., the nation's largest international carrier, surged 7.9 percent to HK$3.97 in Hong Kong. Air China and rival China Southern Airlines Co. said today they will raise ticket surcharges on international flights by as much as 38 percent tomorrow.

Oil's Decline

``The decline in oil gives investors room to breathe,'' Naoki Fujiwara, who oversees the equivalent of $720 million as chief fund manager at Shinkin Asset Management Co., said in Tokyo. ``Crude is the crux of material costs and the drop relieves concern about earnings and a slowdown in the global economy.''

Crude oil for August delivery slumped 3.8 percent to $136.04 a barrel on the New York Mercantile Exchange yesterday, the biggest drop since March 31. Futures, which reached a record high of $145.85 on July 3, have lost 6.4 percent in the previous two days and rose 0.6 percent to $136.85 after Iran fired the missile.

Japanese manufacturers gained after machinery orders rose 10.4 percent in May, compared with the 1.1 percent median estimate in a Bloomberg News survey of economists.

Fanuc, Japan's No. 1 maker of industrial robots, added 1 percent to 9,560 yen, while Sumitomo Heavy Industries Ltd., the country's largest maker of plastic injection-molding gear, climbed 0.7 percent to 679 yen.

China Unicom Ltd. and China Netcom Group Corp., which are merging their operations, gained the most this month in Hong Kong after Macquarie upgraded their ratings, saying they will benefit the most from an industry revamp. China Unicom, the smaller of the nation's two wireless carriers, advanced 3.6 percent to HK$14.92. China Netcom jumped 4.3 percent to HK$22.10.

Bond Sale

Promise Co. slumped 12 percent to 2,480 yen, the most in 13 years, after Japan's second-largest consumer-finance company scaled back a convertible bond sale, citing ``unstable'' markets.

A 17 percent drop in June sales dragged shares of AU Optronics Corp., Taiwan's No. 1 maker of liquid-crystal displays, lower by 6.9 percent to NT$41.80. AU Optronics also retreated after JPMorgan predicted the industry will incur losses in the first half of next year.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.