Asia Stocks Extend Global Rally as Nations Move to Ease Crisis

By Kyung Bok Cho and Ian C. Sayson

Oct. 29 (Bloomberg) -- Asian stocks rose, extending a global rally, amid speculation Japan will cut interest rates and China will take steps to boost equities, adding to efforts worldwide to shore up financial markets.

Mitsubishi UFJ Financial Group Inc. climbed 7.8 percent after the Nikkei English News said the Bank of Japan may lower rates. Toyota Motor Corp. gained 10 percent as the yen fell the most against the dollar since 1974. BHP Billiton Ltd. advanced on higher metals and oil prices. Cnooc Ltd. climbed 15 percent in Hong Kong after third-quarter sales increased.

The MSCI Asia Pacific Index added 3.7 percent to 80.64 as of 3:13 p.m. in Tokyo, extending yesterday's 3.4 percent rise. The index pared a 5.4 percent gain as U.S. index futures lost 0.9 percent, pointing to a drop when U.S. markets open later today.

``Investors are looking forward to an improvement in the financial system's liquidity,'' said Olan Caperina, who helps oversee about $6.7 billion at BPI Asset Management Inc. in Manila. ``It's very tempting for investors with longevity, funds, and the stomach for risks to accumulate at these levels.''

Japan's Nikkei 225 Stock Average advanced 7.7 percent to 8,211.90. South Korea's Kospi Index plunged as much as 7.8 percent after the Herald Business newspaper said the nation was offered funds from the International Monetary Fund, then pared its losses to 3 percent after the government denied the report.

The Dow Jones Industrial Average surged 11 percent yesterday, boosted by expectations the U.S. Federal Reserve will cut interest rates later today.

Credit Creation

MSCI's Asian index lost 51 percent this year and the Nikkei tumbled to a 26-year low two days ago amid concern the widening financial crisis and slowing economic growth will hurt company profits. The MSCI gauge trades at 1.1 times book value, compared with 1.8 times on the Standard and Poor's 500.

Today's advance pared the Asian measure's monthly loss to 27 percent. The gauge is still on course to complete the worst month since its creation in December 1987.

Rallies this month fueled by governments guaranteeing bank deposits and coordinated interest-rate reductions by the world's central banks have fizzled as losses from mortgage-related investments climbed to almost $680 billion. A 12 percent climb in the MSCI Asia Pacific Index on Oct. 13-14 was followed by a two- day, 10 percent drop. The index slumped 7.9 percent last week, after rising 6.2 percent on Oct. 20-21.

``The real issue is one of confidence and the other is credit,'' said David Ng, who helps manage $1 billion of assets at Hwang-DBS Asset Management Sdn. in Kuala Lumpur. ``There is just no credit creation, so while you can cut rates as much as you want, there is no lending.''

Japanese Banks Rise

Mitsubishi UFJ, Japan's biggest listed bank, added 7.8 percent to 594 yen. The BOJ is considering lowering its benchmark rate by a quarter percentage point, the Nikkei reported. The Fed will announce its decision as early as today.

China's insurance commission asked the heads of the nation's largest government-controlled insurers to help stabilize the stock market, the Financial Times reported.

Separately, the nation plans to delay the start of margin lending and short selling, originally scheduled to begin next month, on concern they will aggravate volatility, the South China Morning Post said.

Hong Kong officials are divided over whether to impose a possible ban on short selling, the Standard said. The city's Securities and Futures Commission visited local brokerages yesterday and asked for documentation on short-selling activities, according to the report.

BOC Hong Kong (Holdings) Ltd., the city's biggest bank by assets, added 5 percent to HK$9.44. HSBC Holdings Plc, Europe's largest lender by market value, dropped 6.9 percent to HK$83.80, after a 20 percent surge yesterday. DBS Group Holdings Ltd., Southeast Asia's largest bank, gained 5.3 percent to S$10.74.

Toyota, Cnooc

Japanese automobile and electronics makers advanced after the yen weakened 5.7 percent against the dollar yesterday, the most since January 1974. It fell the most against the euro since the European currency's debut in 1999.

Toyota, Japan's largest carmaker, jumped 10 percent to 3,500 yen. Canon Inc., which had cut its annual earnings forecast on the strong yen, climbed 6.9 percent to 2,730 yen.

Honda Motor Co., Japan's second-biggest automaker, surged 18 percent to 2,440 yen, capping a two-day, 35 percent jump, the most in at least 34 years. A gain in the yen contributed to second-quarter profit diving 41 percent, according to company figures yesterday.

BHP, the world's biggest mining company and Australia's largest oil producer, added 3.7 percent to A$26.30. Rio Tinto Group, the third-largest miner, advanced 3.7 percent to A$70.78.

The London Metal Exchange LMEX Index, a gauge of six metals, climbed for a second day, adding 3.7 percent yesterday. Crude oil rose 2.7 percent to $64.45 a barrel in after-hours trading.

Korean Banks Plunge

Cnooc, China's biggest offshore oil and gas producer, surged 15 percent to HK$5.18 in Hong Kong. Third-quarter sales climbed 69 percent to 30.9 billion yuan ($4.52 billion) amid higher oil prices and increased production, Cnooc said yesterday after markets closed. PetroChina Co., China's largest oil producer, jumped 6.5 percent to HK$4.95.

Seven of 10 stocks on South Korea's KRX Banks Sector Index plunged by the 15 percent daily limit on concern financial companies will fail to reclaim all their loans from C& Group, which owns 41 companies including construction and shipping units. C& Group affiliates said today they had considered putting management in creditor control because of a ``liquidity crisis,'' but ``nothing has been decided.''

KB Financial Group Inc., which owns South Korea's biggest bank, dropped to 32,000 won, while Woori Finance Holdings Co. declined to 7,310 won, and Hana Financial Group Inc. slid to 18,350 won. C& Group affiliates including C&Heavy Industries Co., C&Woobang Construction Co. and C&Merchant Marine Co. tumbled more than 13 percent.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.