Asian Stocks Rise on Crude Decline; Honda, Cathay Pacific Gain

By Chen Shiyin and Shani Raja

Aug. 25 (Bloomberg) -- Asian stocks rallied the most in more than two weeks, led by carmakers and airlines, as oil's biggest plunge in four years eased concern that rising energy costs and faster inflation will erode earnings.

Honda Motor Co., Japan's second-largest automaker, added 4.4 percent after crude fell more than $6 a barrel on Aug. 22 and Federal Reserve Chairman Ben S. Bernanke said inflation should slow. Cathay Pacific Airways Ltd., Hong Kong's biggest carrier, jumped 4.4 percent. Westpac Banking Corp., Australia's No. 2 by value, led banks higher as Korea Development Bank said it's considering investing in Lehman Brothers Holdings Inc., easing concern financial institutions won't be able to raise enough capital to offset credit losses.

``The lower oil price will help Asian industry as well as consumers; it also takes the pressure off inflation,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``The interest shown by the Korean Development Bank demonstrates that there's still lots of capital around the world looking for a home.''

The MSCI Asia Pacific Index gained 1.4 percent to 123.34 as of 2:36 p.m. in Tokyo, rebounding from a four-week, 8.5 percent retreat that sent the gauge to the lowest since July 24, 2006. The index advanced the most since Aug. 6.

The regional measure has dropped 22 percent this year as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.

Japan's Nikkei 225 Stock Average rose 1.7 percent to 12,878.66. Hong Kong's Hang Seng Index, which was closed Aug. 22 because of a typhoon, jumped 3 percent, posting the region's biggest gain. Indexes also climbed in other markets open for trading apart from Indonesia, Pakistan, Malaysia and Thailand. The Philippines is shut for a holiday today.

Honda, Nissan

U.S. stocks advanced on Aug. 22, lifting the Standard & Poor's 500 Index by 1.1 percent. Financial companies on the S&P 500 index rose the most in two weeks, led by a rally in Lehman. Futures on the S&P 500 dropped 0.3 percent.

Honda, which gets about half its sales from North America, jumped 150 yen to 3,590, halting a five-day, 8.3 percent slump. Nissan Motor Co., Japan's third-largest automaker, climbed 3.1 percent to 856 yen. Hyundai Motor Co., South Korea's biggest, rose 3.6 percent to 71,800 won.

Crude oil for October delivery plunged 5.4 percent to $114.59 a barrel, the biggest drop since Dec. 27, 2004, after BP Plc resumed flows through a Caspian pipeline. Futures were at $114.89 today.

Consumer Prices

The drop in energy prices coincided with comments by Bernanke, who said inflation should ease later this year and in 2009, thanks to a recovery in the dollar and declines in commodity prices. The Fed is ``committed to achieving medium-term price stability,'' Bernanke said in a speech in Jackson Hole, Wyoming.

The decline in oil ``will help alleviate pessimism among investors about the earnings outlook for exporters,'' said Yoji Takeda, who helps manage the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``A drop in oil shows investors are shifting their money from commodities. Inflation will recede and interest rates will fall.''

Airlines climbed on speculation lower oil prices will ease fuel costs. Cathay Pacific advanced 78 cents to HK$14.92, poised for its largest gain in two weeks. Qantas Airways Ltd., Australia's largest carrier, jumped 4.9 percent to A$3.66.

Inpex Holdings Inc., Japan's No. 1 explorer, lost 4.5 percent to 1.137 million yen, its largest retreat since Aug. 1. PTT Pcl, Thailand's biggest oil company, fell 1.5 percent to 260 baht.

Banks Advance

Westpac rose 4.5 percent to A$22.98. National Australia Bank Ltd., the country's largest bank by assets, rose 2.3 percent to A$24.09. Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by market value, jumped 4.8 percent to 831 yen, its largest rally since May 30.

A gauge of financial companies on MSCI's Asian index has dropped 27 percent this year, the worst performance among the broader measure's 10 industry groups.

Bank stocks rose today after a Korea Development Bank spokesman said on Aug. 22 the company is considering investments including Lehman. Chief Executive Officer Min Euoo Sung and Lehman spokesman Mark Lane declined to comment. The Maeil Business newspaper reported today Korea Development may resume talks on buying a stake in Lehman if the U.S. company offers a lower stock price.

A possible investment in Lehman by Korea Development helped drive credit-default swap indexes in Australia, Japan and the rest of Asia to the lowest in about a week.

Bank Earnings

China Construction Bank Corp., the country's second-largest bank, jumped 3.7 percent to HK$6.19 in Hong Kong after saying first-half profit soared 71 percent from a year earlier on more lucrative lending and increased fee-based services. The shares gained 1.1 percent to 5.36 yuan in Shanghai trading.

Shanghai Pudong Development Bank Co. climbed 0.8 percent to 21.40 yuan after the bank, which is part-owned by Citigroup Inc. said first-half profit rose 150 percent.

Babcock & Brown Ltd., the worst-performing stock on MSCI's Asian index this year, added 2.8 percent to A$2.55, trimming its 2008 loss to 91 percent. The Australian manager of infrastructure assets may seek a buyer for Irish phone company Eircom Group Plc, the Irish Times reported, citing unidentified people.

Limiting gains, Realtek Semiconductor Corp. tumbled 6.9 percent to NT$63.20, the second-biggest retreat on the regional benchmark. Goldman Sachs Group Inc. cut its share-price estimate for the Taiwan chip designer to NT$60 from NT$67, saying that weakening demand will hurt earnings growth in the third quarter.

Goodman Fielder Ltd., Australia's largest baker, plunged 4 percent to A$1.45 as it turned to a second-half loss after taking an A$170 million ($148 million) writedown on its New Zealand dairy unit.

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