Asian Stocks Gain on Outlook for Earnings; Banks Lead Advance

By Chen Shiyin and Shani Raja

July 21 (Bloomberg) -- Asian stocks rallied the most in four months, led by financial companies and raw-material producers, on speculation profits can withstand a global economic slowdown.

HSBC Holdings Plc jumped in Hong Kong after a newspaper reported the bank held talks with China's sovereign wealth fund to attract investment and Citigroup Inc., the biggest U.S. bank, reported a smaller-than-estimated loss. Kasikornbank Pcl, Thailand's No. 2 bank, rose after profit beat analyst estimates. Flight Centre Ltd., Australia's largest travel agency, surged after saying earnings rose 40 percent.

``The financial sector was a big drag on the market, and there's relief that there's some good news,'' said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $108 billion.

Japan is shut for a holiday today. The MSCI Asia-Pacific excluding Japan Index added 3.3 percent to 420.75 as of 2:42 p.m. in Hong Kong, poised for the biggest gain since March 25. All 10 of the index's industry groups rose, with financial companies comprising 41 percent of the advance.

The index has lost 21 percent this year as raw-material prices soared and the world's largest banks and securities firms reported more than $447 billion of writedowns and credit losses.

South Korea's Kospi index rose 3.5 percent, Asia's largest advance. The S&P/ASX 200 Index rallied 3.5 percent in Australia, where a report today showed the producer price index grew at a slower pace in the second quarter. Benchmark indexes rose elsewhere in the region, except Malaysia and Pakistan.

`Various Opportunities'

Fortescue Metals Group Ltd. surged the most in six months after saying a Western Australian iron-ore project may be expanded on demand from China.

Standard & Poor's 500 Index futures rose 0.2 percent today. U.S. stocks climbed on July 18, after Citigroup, the biggest U.S. bank by assets, reported a loss of 49 cents a share from continuing operations. That was less than the 60-cent loss estimated on average in a Bloomberg survey.

HSBC, Europe's largest bank, rose 4.3 percent to HK$125.20 in Hong Kong, the biggest gain since March 25. The Sunday Telegraph reported Chairman Stephen Green has met officials from the Chinese sovereign fund several times in recent months for discussions. Spokespeople at CIC and HSBC declined to comment.

``We're looking at equity stake investments globally and are considering various opportunities in different countries,'' Wu Xieling, a Beijing-based spokeswoman at CIC, said in a phone interview today.

Banks Advance

The stock also gained after Citigroup joined JPMorgan Chase & Co., the third-biggest U.S. bank by assets, and Wells Fargo & Co., the No. 1 lender on the U.S. West Coast, in reporting results that topped analyst estimates last week. Financial companies in the Standard & Poor's 500 Index climbed more than 11 percent last week.

National Australia Bank Ltd., the country's largest bank, added 4.9 percent to A$28.32, set for the highest since June 11. Kookmin, South Korea's biggest bank, rallied 7.2 percent to 56,700 won.

Kasikornbank added 3.9 percent to 66 baht after profit rose 4.4 percent in the second quarter, boosted by demand for loans and gains in foreign exchange trading. Citigroup Inc. raised its rating on the shares to ``buy'' from ``sell'' today.

Flight Centre surged 12 percent to A$17.65, the most since Oct. 25, 2006, after saying pretax profit rose 40 percent in the year ended June 30, 2008. It reiterated an earlier forecast for pretax earnings to climb 10 percent to 15 percent in the 12 months to June 30, 2009.

Fortescue, Airlines

Fortescue, seeking to be Australia's third-largest iron ore producer, jumped 12 percent to A$9.13, poised for its largest gain since Jan. 23. Chief Executive Officer Andrew Forrest said the company's Pilbara project in Western Australia may be expanded threefold.

BHP Billiton Ltd., the world's largest mining company, rose 4.2 percent to A$38.20. The shares plunged 9.2 percent last week, the most in four months. Rio Tinto Group, the third-biggest, gained 2.6 percent to A$118.49.

Korean Air Lines Co., the country's largest airline, jumped 3.7 percent to 44,850 won, a three-week high. Qantas Airways Ltd., Australia's No. 1 carrier, added 3 percent to A$3.40, while Singapore Airlines Ltd. gained 2.6 percent to S$15.56.

Jet-fuel prices fell last week to a three-week low of $166.15 a barrel in Singapore, almost $16 below its July 3 record, following the drop in crude oil. Crude oil in New York fell 0.3 percent to $128.88 on July 18, rounding off an 11 percent weekly retreat that was the largest drop in more than three years. Futures were at $129.78 today.

Palm Oil

``If oil prices continue to go down, economic activity will pick up and corporate earnings will improve,'' said Kim Jun Ki, who helps manage the equivalent of $1.1 billion at Hanwha Investment Trust Management Co. in Seoul.

Palm oil prices fell 1.3 percent on July 18, their third straight day of losses, as the drop in crude oil damped the outlook for biofuel demand.

IOI Corp., Malaysia's second-biggest palm oil producer, dropped 2.7 percent to 5.45 ringgit, on course for its lowest close since Sept. 10. Smaller Kuala Lumpur Kepong Bhd. plunged 4.4 percent to 13.20 ringgit.

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