Asian Stocks Advance on U.S. Rescue Plan, Short-Selling Bans

By Kyung Bok Cho and Catherine Yang
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Sept. 22 (Bloomberg) -- Asian stocks surged, led by financial and commodity companies, after the U.S. government proposed buying $700 billion of bank assets and Australia and Taiwan restricted the short sale of equities.

Mitsubishi UFJ Financial Group Inc. and Macquarie Group Ltd. rose more than 4 percent on the U.S. Treasury's plans to clean up bank balance sheets. Fortescue Metals Ltd. jumped 26 percent after Australia's regulator banned speculators from borrowing stocks and selling them to profit from falling prices. Bank of China Ltd. led Chinese shares higher after the securities regulator made it easier for companies to buy back stock.

``The positive thing about the Treasury plan is that it addresses the entire system, the bad debts and assets, rather than one by one,'' said David Ng, who is buying financial shares for the $1 billion of assets he helps manage at Hwang-DBS Asset Management Sdn. in Kuala Lumpur. ``The buying has been triggered by the short-selling bans. That's been the main driver.''

The MSCI Asia Pacific Index gained 2.6 percent to 117.11 as of 2:05 p.m. in Tokyo, extending Sept. 19's 5.5 percent jump. The measure's gauge of financial stocks, which ended last week at the lowest price-earnings ratio this decade, was the biggest contributor to today's gains.

The regional measure tumbled to the lowest in three years last week as the credit crisis forced Lehman Brothers Holdings Inc. into bankruptcy, the U.S. government to take over American International Group Inc. and Merrill Lynch & Co. to sell itself to Bank of America Corp.

Japan's Nikkei 225 Stock Average rose 1.9 percent to 12,143.64. NGK Insulators Ltd. soared after lifting its profit forecast. Benchmarks advanced in all markets, except Pakistan. The Karachi 100 index was little changed as trading curbs prevented declines following a Sept. 20 hotel bombing in Islamabad that killed 53 people.

Fast Passage

Standard & Poor's 500 Index futures fell 0.7 percent in after-hours trading. U.S. stocks advanced on Sept. 19, with the S&P 500 jumping 4 percent. Treasuries rose on speculation the Federal Reserve will cut interest rates to support the U.S. rescue plan. The dollar dropped against the yen on concern the plan will widen the U.S. budget deficit.

Mitsubishi UFJ, Japan's biggest bank, rose 4.9 percent to 904 yen, the highest since Aug. 6. Sumitomo Mitsui Financial Group Inc., Japan's second-largest by market value, advanced 3.8 percent to 684,000 yen. Kookmin Bank, South Korea's largest, added 5 percent to 58,700 won.

U.S. Treasury Secretary Henry Paulson's rescue plan would allow the government to buy a variety of mortgage-related securities to relieve a freeze in credit markets. Democrats, who control both houses of the U.S. Congress, pledged not to slow down its passage or tie it to an economic stimulus plan.

``The exodus from Asia, at least from our part of the world, is probably just about over,'' said Don Gimbel, who oversees $2 billion as senior managing director at Carret & Co. in the U.S., in an interview with Bloomberg Television. The U.S. rescue plan is ``a step in the right direction,'' he said.

Babcock Soars

Since the start of 2007, global financial companies have reported more than $510 billion in credit losses and writedowns linked to the slump in the U.S. housing market and slowing economic growth.

Macquarie, Australia's largest securities firm, added 4.5 percent to A$37.51. Babcock & Brown Co., which had lost 97 percent this year until Sept. 19, surged 67 percent to A$1.33. Cathay Financial Holding Co., Taiwan's largest financial- services company, rose 3.2 percent to NT$50.30.

Australian regulators said on Sept. 19 it will abolish so- called ``naked'' short selling of shares from today, and extended its ban yesterday to ``covered'' transactions. In covered short selling, stock is borrowed for the purposes of betting on share price declines, while shares are never borrowed in naked sales.

Share Buybacks

ASX Ltd., which runs Australia's biggest stock exchange, lost 7.3 percent to A$32, the Asian benchmark's third-biggest loser, on concern market trading volumes will decline.

Taiwan's Financial Supervisory Commission said yesterday it will ban the short-selling of 150 stocks when the shares trade below the previous session's close. The U.S. Securities and Exchange Commission said on Sept. 19 it temporarily banned short-selling in shares of financial companies to curtail the market rout.

Fortescue Metals Group Ltd. rose the most in almost four years, jumping 26 percent to A$7.20. Fortescue, seeking to become Australia's third-largest iron ore exporter, has been the target of short-sellers, Chief Executive Officer Andrew Forrest said last month.

BHP Billiton Ltd., the world's biggest mining company, added 10 percent to A$39.02 in Sydney. Mitsubishi Corp., Japan's largest trading company which generates more than half of its profit from commodities dealing, soared 9.8 percent to 2,855 yen.

China Rally

Crude oil surged 6.8 percent on Sept. 19 to $104.55 a barrel in New York, capping a three-day, 15 percent rally. The contract recently rose further to $104.90 in after-hours trading. A measure of six metals that trade on the London Metal Exchange advanced 3.4 percent on Sept. 19, breaking a four-day slide.

Bank of China, the nation's third-largest lender, rose by the daily 10 percent limit to 3.70 yuan. Industrial & Commercial Bank of China Ltd., the nation's largest bank, gained 10 percent to 4.16 yuan.

Chinese companies can start the share buyback process after two-thirds of shareholders approve it, and disclose details the next working day without seeking approval from the China Securities Regulatory Commission, the regulator said yesterday. Last week, China scrapped the tax on stock purchases and said it will buy shares in three of the largest state-owned banks to shore up investor confidence.

NGK, which makes filters for diesel engines, soared 13 percent to 1,325 yen, the most since July 30 2007, after lifting its estimate for earnings.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net.