Asia Stocks Rise for First Week in Seven on Government Measures

By Chua Kong Ho

Oct. 18 (Bloomberg) -- Asian stocks rose for the first week in seven after money market rates fell as governments in the region stepped up efforts to unlock credit markets.

Mitsubishi UFJ Financial Group Inc. and Westpac Banking Corp. rose more than 6 percent as Singapore and Malaysia joined Hong Kong and Australia in guaranteeing bank deposits. Tokyo Electric Power Co. climbed 16 percent as oil prices traded at half their July record and investors sought companies whose earnings are sheltered from a slowdown in overseas markets. The decline in oil and metals prices dragged BHP Billiton Ltd., the world's largest mining company, down 11 percent.

``The focus is on what the next policy response will be and the movements of the short-term money markets,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``Long-term investors are sitting on the sidelines waiting out this period.''

The MSCI Asia Pacific Index climbed 1.6 percent to 87.29 this week, its first weekly gain since August. A measure of utility companies had the biggest gains among the index's 10 industry groups, with raw-materials producers posting the largest decline.

The MSCI Asian index had its biggest-ever advance and decline this week, as investors weighed the likelihood that governments will succeed in preventing a financial industry collapse and limit the severity of a global economic slowdown.

Japan's Nikkei 225 Stock Average surged the most in its 59- year history on Oct. 14 after U.S. and European governments said they will take stakes in banks. The measure had its biggest slump since 1987 on Oct. 16 after U.S. retail sales declined, finishing the week with a 5 percent gain.

Perceived Risk

Hong Kong's Hang Seng Index fell 1.6 percent in the week, the seventh weekly decline and the longest losing streak since October 2002, as the city's Chief Executive Donald Tsang said he doesn't rule out a recession.

Mitsubishi UFJ, Japan's largest listed bank, gained 7 percent to 760 yen. Commonwealth Bank of Australia Ltd. added 4.7 percent to A$41.41 in Sydney. Westpac Banking advanced 6.4 percent to A$21.48.

The Singaporean and Malaysian deposit guarantees on Oct. 16 followed central banks in the U.S. and Europe earlier in the week committing $2 trillion to rescue financial companies from the credit crisis. The pledges drove the MSCI Asia Pacific index up 12 percent on Oct. 13-14. Institutions worldwide have posted $660 billion of losses related to U.S. mortgage investments.

The rate Australian banks charge each other for three-month loans fell to 5.66 percent from 6.2 percent a week ago. Hong Kong's three-month interbank offered rate for local dollar loans dropped the most since Sept. 26, down 0.15 percentage point to 4.2 percent. Perceived default risk in the region also declined, with measures of credit-default swaps falling in Japan and Australia.

Crude Oil Declines

Tokyo Electric, Asia's largest power producer, climbed 16 percent to 2,585 yen. Kansai Electric Power Co. gained 17 percent to 2,250 yen. Both companies use heavy oil in some of their plants.

Crude oil futures dropped to $71.85 a barrel in New York this week, bringing its plunge from a July peak to more than 50 percent. A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell for a fifth week on concern demand for base metals will drop as economic activity slows.

BHP slumped 11 percent to A$24.59. Rio Tinto Group tumbled 14 percent to A$62.62, while Jiangxi Copper Co. sank 10 percent to 10.43 yuan in Shanghai.

MSCI's Asian index tumbled 31 percent in the previous six weeks as credit markets seized up, economies slowed and companies failed, making the region's equities their cheapest ever. Shares on the index were valued at 9.8 times earnings yesterday, near a record low reached on Oct. 10.

``Valuations at the moment are pretty reasonable. What I am worried about is that earnings will have to be downgraded,'' said Hans Goetti, who oversees $10 billion in Asia as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. ``When you have an oversold situation, you can buy almost anything because it's a snap-back rally.''

To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net