Asia Stocks Jump, Led By Banks, on Citigroup Rescue; Bumi Gains

By Patrick Rial and Masaki Kondo

Nov. 25 (Bloomberg) -- Asian shares rose, led by financial companies and commodity producers, as the U.S. government's rescue of Citigroup Inc. shored up confidence in banks and the world's biggest economy.

Mizuho Financial Group Inc. gained 9.2 percent in Tokyo as the cost of protecting against default declined. BHP Billiton Ltd. soared 12 percent, the most since 1987, after oil and metals rallied yesterday. BHP scrapped a $66 billion takeover bid for Rio Tinto Group following the close of trading in Sydney today. Mitsubishi Estate Co. surged 8.9 percent after UBS AG raised its rating on Japan's three biggest developers to ``buy.''

``The U.S. government has made it clear it won't allow Citigroup to fail, so investors believe the financial crisis won't deepen,'' said Naoki Fujiwara, a Tokyo-based senior fund manager at Shinkin Asset Management Co., which manages about $5.7 billion. ``It's unlikely commodity prices will just continue falling because demand is still there in the global market.''

The MSCI Asia Pacific Index added 3.4 percent to 79.46 as of 4:39 p.m. in Tokyo. More than four shares climbed for each that retreated on the gauge as all 10 industry groups rose.

Japan's Nikkei 225 Stock Average advanced 5.2 percent to 8,323.93. The country's markets were closed yesterday for a holiday.

Australia's S&P/ASX 200 Index jumped 5.8 percent, its biggest gain since October 1997, led by BHP. All other benchmark gauges in the region rose, except in China and Pakistan.

Annual Loss

MSCI's Asian index is down 50 percent this year. Previous rallies sparked by interest rate cuts and government bailouts have fizzled as almost $1 trillion in credit losses and writedowns battered financial firms and dragged the global economy toward recession. That's left about half of Asia's stocks trading at below book value.

U.S. stocks surged yesterday, with the Standard & Poor's 500 Index rising 6.5 percent. That capped its biggest two-day rally since 1987, after the government decided to protect Citigroup from losses on troubled mortgages. S&P 500 futures were little changed in trading today.

Citigroup received a government support package which injects $20 billion of capital and shields the bank from losses on $306 billion of mortgages, commercial loans and other securities. The bank's stock soared 58 percent yesterday, rebounding from last week's 60 percent plunge. The funds also helped other financial shares climb, with a gauge of banks included in the S&P 500 surging 19 percent.

Anxiety `Remains'

``The fact that we are moving away from a collapse of the financial system is positive, but there remains a lot of anxiety among investors as no one knows which will be the next bank in trouble,'' said Kenji Tomida, who oversees $16 billion as chief fund manager at T&D Asset Management Co. in Tokyo. ``The U.S. housing market is still key, so when we can see a bottom in sight for that as well as a cleanup of bank balance sheets, it will be a great time to buy.''

Mizuho gained 9.2 percent to 247,700 yen. Australia & New Zealand Banking Group Ltd., Australia's third-largest, surged 13 percent to A$14.55. Macquarie, the country's biggest securities firm, gained 7.6 percent to A$29.65, capping a six-day, 44 percent rally.

The cost of protecting Japanese and Australian corporate bonds from default declined, according to traders of credit- default swaps. The Markit iTraxx Japan index was quoted 55 basis points lower, while the iTraxx Australia fell 20 basis points.

Commodities Surge

The Citigroup rescue plan bolstered confidence banks will loosen lending and demand for raw materials will increase. Crude oil for January delivery climbed 9.2 percent to $54.50 a barrel in New York yesterday, the biggest one-day advance since Nov. 4. Copper futures for March delivery gained 5.9 percent and gold rose to a five-week high. Oil dropped 1.4 percent today, while copper fell 0.3 percent.

BHP climbed 12 percent to A$26.22. The company cited the turmoil in global markets as a reason for abandoning its hostile bid for Rio Tinto, the world's third-largest mining company. Buying Rio would have increased debt exposure and it would have been difficult to sell assets, BHP Chief Executive Officer Marius Kloppers said.

Rio Tinto ended the day 6.9 percent higher at A$63.90.

PT Bumi Resources, Asia's biggest exporter of power-station coal, surged 20 percent to 850 rupiah. Fortescue Metals Group Ltd., Australia's third-largest iron-ore producer, soared 21 percent to A$2.05. Cnooc Ltd., China's biggest offshore oil and gas producer, rose 8.5 percent to HK$5.60 in Hong Kong.

Mitsubishi Estate, Japan's second-largest developer, added 8.9 percent to 1,266 yen. Mitsui Fudosan Co., the largest, climbed 11 percent to 1,321 yen, while Sumitomo Realty & Development Co., the No. 3, gained 13 percent to 1,304 yen.

Rating Upgrade

Toshihiko Okino, an analyst at UBS in Tokyo, lifted all three companies to ``buy'' from ``neutral'' in a note dated Nov. 21. The developers, which derive most of their revenue from rental income, are undervalued and likely to produce stable returns as vacancy rates are lower than average for their properties, the analyst wrote.

Malaysian developers gained after the central bank cut interest rates by a quarter of a percentage point, the first decrease since 2003, and lowered the amount lenders need to set aside as reserves.

Malaysian Resources Corp., the nation's biggest office builder, rose 4.5 percent to 70 sen. UEM Land Holdings Bhd., developer of Malaysia's biggest property project, added 3.4 percent to 61 sen.

In Seoul, Hyundai Motor Co., South Korea's largest automaker, dropped 7.3 percent to 37,100 won after cutting production of sport-utility vehicles and small trucks at its biggest domestic factory as demand slows. Hyundai Mobis, which supplies Hyundai, lost 15 percent to 55,300 won, the sharpest plunge since December 1998.

Brambles, Harvey Norman

Australia's Brambles Ltd., the world's biggest supplier of pallets used to move and store goods, tumbled 7.8 percent to A$6.65 in Sydney, a record low, after Graham Kraehe, the company's chairman, said the current ``challenging'' environment could persist into 2010.

Harvey Norman Holdings Ltd., Australia's biggest furniture and electronics retailer, slumped 8.2 percent to A$2.24 after the company said first-quarter earnings fell 32 percent as slowing consumer spending curbed sales.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.