Asian Stocks Surge on Government Support Measures; Banks Climb

By Kyung Bok Cho and Chan Tien Hin

Oct. 13 (Bloomberg) -- Asian stocks jumped, rebounding from the worst week since at least 1987, on speculation bank bailouts and loan guarantees will prevent the credit crisis from worsening.

Industrial & Commercial Bank of China Ltd., the world's largest bank by market value, surged 13 percent in Hong Kong after European leaders agreed to back new bank debt and the U.K. pledged to invest $64 billion in three lenders. National Australia Bank Ltd., jumped more than 7 percent after the government guaranteed bank deposits. ICICI Bank Ltd. soared a record 19 percent as the Indian bank assured customers their deposits were safe.

The MSCI Asia Pacific excluding Japan Index soared 7.7 percent to 273.54 at 4:42 p.m. in Hong Kong, rebounding from last week's 20 percent tumble. Financial stocks accounted for almost half of today's gain. Japan is shut for a holiday.

``As long as the market gets a sense of assurance that the big banks are not going to fall, a credit deadlock would be mitigated,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. ``Financial stability is kind of assured for the short term.''

Hong Kong's Hang Seng Index surged 10 percent, recouping more than half of last week's 16 percent plunge. India's Sensitive Index added 7.5 percent. Australia's S&P/ASX 200 gained 5.6 percent, its biggest advance since October 1997.

Indonesia's Jakarta Composite Index rose 1 percent, erasing an earlier loss of 6.4 percent, as trading resumed following a three-day suspension.

World leaders are working to bolster financial systems to unlock credit markets and avert an economic collapse. About $28 trillion has been erased from global equities this year. The MSCI World Index of stocks in 23 developed countries slid 20 percent last week, the most since records began in 1970.

Global Measures

European leaders pledged to guarantee new bank debt until the end of 2009 and keep distressed lenders afloat. The U.K. government said it will invest 37 billion pounds in Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group.

In Asia, Australia and New Zealand's governments said they will protect all deposits with financial institutions. Indonesia raised the maximum guaranteed deposits at banks 20-fold. Hong Kong's government said it may use foreign reserves to stabilize markets.

Industrial & Commercial Bank, also known as ICBC, surged 14 percent to HK$4.28. The stock lost 49 percent of its value in the past 12 months through Oct. 10. Sun Hung Kai Properties Ltd., Hong Kong's largest developer by market value, rose 14 percent to HK$66.85, the most since October 1998. Capitaland Ltd., Southeast Asia's biggest builder, climbed 14 percent to $2.28.

``At last we are seeing some light at the end of the tunnel,'' said Steven Leung, director of institutional sales at UOB-Kay Hian Ltd. in Hong Kong. ``We are finally seeing some buying in finance names.''

Australian Guarantee

National Australia Bank, the country's largest lender, added 7.6 percent to A$22.40 and Commonwealth Bank of Australia, the nation's biggest provider of mortgages, rose 6.7 percent to A$42.20 after funding costs fell and the central bank added A$2.85 billion ($1.9 billion) to the financial system.

The premium charged to exchange floating- for fixed-rate interest payments in Australia for one year shrank the most since 2000.

ICICI Bank, the Indian lender with the biggest losses on overseas investments, jumped 19 percent to 431 rupees, the most since the stock first started trading in 1997 and nearly erasing its 20 percent plunge on Oct. 10. Chief Executive Officer K.V. Kamath said the bank has sufficient funds and was targeted by short sellers who spread rumors the bank may struggle to refund depositors.

PT Perusahaan Gas Negara, biggest distributor of the fuel in Indonesia, gained 9.4 percent to 1,740 rupiah.

Trading Supension

Indonesia's exchange halted trading on Oct. 8 after the benchmark index fell 10 percent, bringing the three-day loss to 21 percent. The exchange cut the limit on stock price movements to 10 percent and the government eased buyback rules to help revive investor confidence before allowing trading to resume.

Taiwan stocks dropped after resuming trading following a holiday on Oct. 10. Chunghwa Telecom, Taiwan's largest phone operator, fell 3.5 percent to NT$69.70. Nanya Technology Co., the island's second-largest memory chipmaker, lost 3.5 percent to NT$7.18.

Taiwan's government announced yesterday it will halve the limit on daily stock declines to 3.5 percent for this week to curb stock-market declines. The financial regulator will also extend its ban on short selling, introduced on Oct. 1 and due to expire on Oct. 14, until the end of the year.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net