Asian Stocks Rise as Government Policies Provide Market Support

By Patrick Rial

Oct. 20 (Bloomberg) -- Asian stocks advanced, led by financial and energy shares, after South Korea's government announced Asia's biggest financial rescue package and oil prices climbed for a second day.

Hana Financial Group Inc., which controls South Korea's fourth-largest bank, surged 8.4 percent after the government guaranteed $100 billion of lenders' foreign-currency debt. Fubon Financial Holding Co. added 6.7 percent after agreeing to buy ING Groep NV's life insurance unit in Taiwan. BHP Billiton Ltd. climbed 7.7 percent on speculation OPEC will cut output. Nissan Motor Co. rose 8.9 percent after UBS AG recommended the shares.

``Government policies enacted so far have been enough to make sure that the worst of the panic is behind us,'' said John Vail, who helps oversee about $118 billion as global strategy head at Nikko Asset Management Co. ``We do feel uncomfortable being underweight equities when valuations are so low.''

The MSCI Asia Pacific Index rose 3.6 percent to 90.44 as of 4:48 p.m. in Tokyo. The gauge is still down 43 percent for the year, set for its worst annual performance since the benchmark was created in 1987.

Shares in the Asian benchmark were valued at 10 times trailing earnings, near a record low reached on Oct. 10. The gauge was valued at 19.5 times earnings when it reached a peak on Nov. 1.

About $30 trillion has been wiped off global stock benchmarks since the high on Oct. 31 last year as the subprime mortgage crisis toppled financial institutions and spread to economies throughout the world.

Kospi, CSI 300

Japan's Nikkei 225 Stock Average added 3.6 percent to 9,005.59. South Korea's Kospi index advanced 2.3. China's CSI 300 Index jumped 3.5 percent as the economy expanded in the third quarter at the slowest pace in five years, prompting speculation the government will introduce expansive policies. Most other Asian markets rose.

Standard & Poor's 500 Index futures rose 2.8 percent in trading today. The S&P 500 lost 0.6 percent on Oct. 17 after new home construction fell to the lowest in a quarter century, while consumer confidence dropped the most on record.

Hana Financial climbed 8.4 percent to 22,000 won. Shinhan Financial Group Ltd., South Korea's second-largest financial company, added 5.3 percent to 35,500 won. Mitsubishi UFJ Financial Group Inc., Japan's largest lender, gained 5.3 percent to 800 yen. National Australia Bank Ltd., the nation's largest bank by assets, rose 6.4 percent to A$22.98.

South Korea's government moved yesterday to rescue its financial system by guaranteeing $100 billion of lenders' foreign-currency debts and providing $30 billion in U.S. dollars to banks. The government will also provide tax benefits for long-term equity investors.

U.S., Europe

The measures came after governments in the U.S. and Europe pledged $2 trillion to rescue financial companies and governments guaranteed bank deposits.

``We can expect to see a significant stabilization of the financial markets by the end of this month or the beginning of the next,'' said Kim Young Il, who oversees the equivalent of $6.5 billion as head of equities at Korea Investment Trust Management Co. in Seoul. ``But it will take time for the real economy to improve, and that means investor sentiment won't immediately show a turn for the better.''

The cost of protecting Japanese and Australian corporate bonds from default declined, according to traders of credit- default swaps. Meanwhile, interbank funding costs in Australia dropped to the lowest level since Lehman Brothers Holdings Inc. collapsed on Sept. 15.

Hong Kong's three-month interbank lending rate, or Hibor, fell 53 basis points to 3.66 percent, the lowest since Sept. 29, following an injection of funds by the city's de-facto central bank.

Philippines Reserves

Philippine central bank Deputy Governor Diwa Guinigund said the bank may cut the lenders' reserve requirement to boost liquidity in the financial system, helping spur growth.

Malaysia's Finance Minister Najib Razak said the country will review its foreign investment guidelines to lure investors and double the size of a state-run asset manager. MISC Bhd., owner of the world's biggest fleet of liquefied natural gas vessels, climbed 3.7 percent to 8.40 ringgit in Kuala Lumpur.

Fubon Financial advanced 6.7 percent to NT$19.05. The company will issue new shares to pay for a $600 million purchase of ING's Taiwan insurance unit, increasing its customer base by a third.

BHP, Australia's biggest oil producer, rose 7.7 percent to A$26.49, the first gain in four days. Woodside Petroleum Ltd., Australia's No. 2 oil producer, jumped 6.4 percent to A$38.31. Marubeni Corp., a Japanese trading house that generates more than a quarter of its revenue from energy, climbed 5.2 percent to 406 yen.

Crude, OPEC

Crude oil for November delivery gained as much as 3 percent to $74.00, extending a 2.9 percent advance on Oct. 17. The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world's oil, favors reducing production, according to Chakib Khelil, the group's president.

In China, Poly Real Estate Group Co., the nation's second- largest property company, climbed 5.9 percent to 15.48 yuan after the government said it will cut transaction fees on home sales to spur apartment purchases. Citic Securities Co., the brokerage unit of China's biggest investment company, soared 9.2 percent to 20.46 yuan.

China's economy expanded at a 9 percent annual pace in the third quarter, lower than an estimate of 9.7 percent by economists in a Bloomberg survey. That was also the slowest pace of growth since an outbreak of SARS in 2003.

Property Sector

``We expect the government to come up with policies to boost the economy, especially in the property sector,'' said Michelle Qi, a Shanghai-based portfolio manager at Bank of Communications Schroder Fund Management, which oversees about $790 million.

Nissan climbed 8.9 percent to 527 yen, while minicar maker Daihatsu Motor Co. rose 6.5 percent to 961 yen after UBS lifted both companies to ``buy,'' calling the shares cheap.

Panasonic Corp., the world's largest maker of consumer electronics, gained 8.9 percent to 1,633 yen after the Nikkei newspaper said operating profit for the six months ended in September may beat the company's own estimate by more than 20 billion yen ($197 million).

Shares in the MSCI AC Asia Pacific Consumer Discretionary Index traded at 0.98 times book value, the cheapest level among the 10 industry groups in the Asian benchmark.

``Company earnings may not be as bad as we feared,'' said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. ``The recent declines in the stock market have already priced in possible negative results.''

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net