Asian Stocks End Week Little Changed as Bailout Optimism Fades

By Hanny Wan and Patrick Rial

Sept. 27 (Bloomberg) -- Asian stocks were little changed for the week as optimism faded that a $700 billion U.S. plan to rescue its financial system would be agreed by Congress.

China Merchants Bank Co. retreated 11 percent in Hong Kong as Republicans said they wouldn't support the rescue plan and Washington Mutual Inc. was seized in the U.S.'s biggest bank failure. Pacific Basin Shipping Ltd. tumbled 27 percent after cargo rates slumped as the global slowdown cut demand for commodities. Babcock & Brown Ltd. soared 191 percent in Sydney, boosted by a ban on short selling.

``The assumption is that the bailout will take longer than expected, which is negative,'' said Tsuyoshi Shimizu, a senior fund manager at Mizuho Asset Management Co., which oversees $26 billion. ``As with Washington Mutual, the longer it takes to pass something, the more victims we're going to see.''

The MSCI Asia Pacific Index ended the week 0.3 percent lower at 113.77. The gauge jumped 2.6 percent on Sept. 22 after the U.S. government proposed buying bank assets and Australia and Taiwan restricted short selling. The index fell the next four days as debates by U.S. lawmakers on the plan dragged on.

China Merchants, the nation's fifth-largest bank by market value, declined 11 percent to HK$20 in Hong Kong. A group of House Republicans led by Eric Cantor offered an alternative plan to one proposed by Treasury Secretary Henry Paulson that's backed by President George W. Bush and Democratic leaders.

MSCI's Asian index has dropped 28 percent this year as a U.S. housing recession sparked a credit crisis, left global financial companies with more than $520 billion in writedowns and losses, and threatened to send the global economy into a recession.

Banks Gain

Still, a measure of financial stocks gained after Warren Buffett's Berkshire Hathaway Inc. said it will buy $5 billion of Goldman, Sachs & Co. stock and Mitsubishi UFJ Financial Group Inc. said it will purchase as much as 20 percent of Morgan Stanley.

Mitsubishi UFJ, Japan's largest bank, advanced 8 percent to 931 yen. Nomura Holdings Inc., Japan's biggest securities firm, soared 12 percent to 1,468 yen after agreeing to pay less than a month's revenue for units of bankrupt Lehman Brothers Holdings Inc. in Asia and Europe.

``It's smart for Japan's financial institutions to pick up assets at cheap prices and expand overseas,'' said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management, which oversees about $20 billion.

Babcock & Brown, a manager of infrastructure assets, jumped 191 percent to A$2.31, the biggest gain on MSCI's Asian index. Australian regulators banned short selling, with some exceptions, from Sept. 22. Babcock has blamed short sellers for sending its stock down 91 percent this year.

Shipping Lines

Pacific Basin, Hong Kong's largest dry-bulk shipping line, sank 27 percent to HK$6.20. Mitsui O.S.K. Lines Ltd., Japan's largest operator of dry-bulk ships, lost 13 percent to 946 yen.

The Baltic Dry Index, a gauge of the cost of shipping commodities, lost 7.3 percent on Sept. 25, bringing its four-day slide to 16 percent, on weaker demand for steel from Chinese construction companies.

China's CSI 300 Index jumped 8.2 percent, advancing for the first week in nine. Haitong Securities Co. and Citic Securities Co., the country's two largest brokerages, jumped after China's cabinet agreed to let investors buy shares on credit and sell borrowed stock to help develop the market, an official familiar with the plan said.

The government also appealed on Sept. 18 for state-owned companies to promote ``stable'' development of the nation's capital markets by buying back shares in publicly traded units. Haitong Securities surged 40 percent to 21.52 yuan. Citic Securities soared 38 percent to 24.76 yuan.

`Returning to Normal'

In Hong Kong, Bank of East Asia Ltd. lost 11 percent to HK$25.85 after rumors about its financial stability spurred the city's first bank run in more than a decade. The bank said yesterday operations are ``returning to normal'' after the city's Financial Secretary John Tsang called rumors were ``unfounded'' and central bank head Joseph Yam pumped liquidity into the banking system.

China Mengniu Dairy Co., the country's largest milk producer by market value, resumed trading on Sept. 23, tumbling 59 percent to HK$8.29 after the industrial chemical melamine was found in its products.

Tests showed that milk products made by companies including Mengniu Dairy, Sanlu Group Co., Inner Mongolia Yili Industrial Group Co. and Bright Dairy & Food Co. contained melamine, which is banned as a food ingredient in China.

To contact the reporters on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net