By Kyung Bok Cho and Chan Tien Hin
Oct. 30 (Bloomberg) -- Asian stocks, bonds and currencies surged after China, Taiwan and the U.S. cut interest rates to boost bank lending and economic growth. The MSCI Asia Pacific Index headed for a record three-day gain.
South Korea's Kospi index climbed 11 percent, led by Samsung Electronics Co. and Posco, after the U.S. Federal Reserve agreed to provide the nation with $30 billion in a currency swap. The won surged the most in a decade. BHP Billiton Ltd. advanced as commodities rallied. Toyota Motor Corp. and Mazda Motor Co. added more than 11 percent as a lower yen boosted their profit outlooks.
``We're coming from a very oversold position, so it deserved a very good bounce,'' said Scott Lim, who oversees about $850 million as chief executive officer at MIDF Amanah Asset Management Sdn. in Kuala Lumpur. ``If governments continue to work together and cut interest rates and provide liquidity, we might not see the kind of massive prolonged recession that everybody fears.''
The MSCI Asia Pacific Index added 7.9 percent to 87.09 as of 2:22 p.m. in Tokyo, set to complete its biggest three-day gain since the gauge was created in 1987. Today's advance pared the monthly loss to 19 percent, the worst on record.
Japan's Nikkei 225 Stock Average climbed 7.9 percent to 8,863.83 as Softbank Corp. gained by its daily limit.
Hong Kong's Hang Seng Index advanced 10 percent, led by Ping An Insurance (Group) Co. and Industrial & Commercial Bank of China Ltd., after China lowered its one-year lending rate to 6.66 percent, from 6.93 percent. The measure is on course for its biggest three-day advance since April 1973.
Liquidity, Stimulus
Futures on the U.S. Standard & Poor's 500 Index rose 2.5 percent today. U.S. stocks declined yesterday, with the benchmark index erasing a 3.1 percent advance in the final 12 minutes, on concern lower interest rates won't stem a recession.
Central banks across the globe are trying to curb an economic slowdown as the financial crisis weighs on consumer sentiment and business spending. The Fed and the People's Bank of China yesterday cut rates to stimulate demand, while Taiwan and Hong Kong's central banks followed today.
``Cutting interest rates is the most effective card you can play at this point,'' said Chang In Whan, chief executive officer of KTB Asset Management Co. in Seoul, which manages $4.3 billion. Chang said he is a ``strong buyer'' of stocks.
Taiwan Semiconductor Manufacturing Co., the world's largest custom-chip maker, rose 6.9 percent to NT$44.90 in Taipei, leading Taiwan's Taiex Index 6.2 percent higher following the rate cut. Cathay Financial Holdings Co., the island's biggest financial-services company, advanced 7 percent to NT$32.95.
BHP, Toyota
Ping An, China's second-biggest insurance company, soared 24 percent to HK$32.35 in Hong Kong. ICBC, the world's biggest bank by market value, climbed 10 percent to HK$3.56.
Samsung, South Korea's largest company by market value, jumped 10 percent to 521,000 won. Posco, the second biggest, climbed by the daily limit of 15 percent to 352,000 won. Both stocks gained the most since February 2002.
The Fed said yesterday it agreed to provide $30 billion each to the central banks of South Korea, Singapore, Brazil and Mexico, ``four large systemically important economies,'' in a statement. The currency-swap arrangements aim ``to mitigate the spread of difficulties in obtaining U.S. dollar funding.''
Korean Air Lines Co., the nation's biggest carrier, jumped 15 percent to 32,350 won. SK Energy Co., the largest oil refiner, surged 15 percent to 63,200 won. A stronger won reduces the dollar-denominated fuel bills of airlines and refiners.
Rallies Fizzle
Mizuho Financial Group Inc., Japan's second-biggest bank by assets, rose 14 percent to 234,900 yen. Sumitomo Mitsui Financial Group Inc., the third largest, added 12 percent to 382,000 yen.
Japan's Prime Minister Taro Aso will announce economic stimulus measures worth 5 trillion yen ($51 billion) today, the Yomiuri newspaper said. The package will include 2 trillion yen in assistance for households, according to the report.
MSCI's Asian index hasn't managed a four-day advance since July. Recent rallies fueled by government 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.
``The outlook of a weak global economy hasn't changed,'' said Hiroshi Morikawa, a senior strategist at MU Investments Co. in Tokyo, which manages the equivalent of $14 billion. ``The shot of confidence from the rate cut is temporary.''
Commodities Jump
BHP, the world's biggest mining company, advanced 8.8 percent to A$28.60 in Sydney. Rio Tinto Group, the third largest, gained 9.2 percent to A$77.32.
Copper futures for December delivery surged 12 percent in New York yesterday, the steepest jump in two years, while crude oil for December delivery climbed 7.6 percent to $67.50 a barrel.
Cnooc Ltd., China's biggest offshore oil and gas producer, jumped 18 percent to HK$5.90 in Hong Kong, set to round off a three-day, 39 percent rally. PetroChina Co., Asia's biggest oil producer, gained 14 percent to HK$5.61.
Softbank, Japan's third-largest mobile-phone company, rose by its daily maximum of 100 yen, gaining 13 percent to 850 yen. The company said its operating profit, or sales minus the cost of goods sold and administrative expenses, will increase 24 percent next fiscal year as it adds users and reduces expenses.
Toyota, Japan's largest automaker, advanced 12 percent to 3,920 yen. Nintendo Co., the world's largest maker of handheld game consoles, climbed 11 percent to 30,600 yen in Osaka. Mazda, a third owned by Ford Motor Co., surged 22 percent to 241 yen.
Weaker Yen
The yen fell 0.9 percent from late yesterday in New York to 98.24 per dollar and 2.9 percent to 129.88 per euro as the rally in stocks gave investors confidence to buy higher yielding assets. The Australian dollar rose 5.6 percent from late Asian trading to 68.59 U.S. cents.
The South Korean won, which two days ago sank to a decade- low 1,495 won per dollar, jumped 12 percent to 1,251 as Finance Minister Kang Man Soo said the government is seeking currency swap deals with Japan and China. Default protection costs on South Korean government debt fell by the most in more than four years, dropping 130 basis points to 435 basis points.
``The swap program will address lingering concerns among investors about the adequacy of Korea's foreign reserves,'' said Kwon Goohoon, an economist with Goldman Sachs Group Inc. in Seoul.
Korea's government bonds rose on optimism that the central bank will lower borrowing costs again once the currency market stabilizes. The yield on the 5.5 percent note due June 2011 fell 4 basis points to 4.48 percent.
``The swap deal removed the biggest headache, problems of foreign currency shortage,'' said Kong Dong Rak, a fixed income strategist with Hana Daetoo Securities Co. in Seoul. ``It will enable the central bank to push ahead with more rate cuts as the currency market regains stability.''
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net.
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