Asian Stocks Advance on China Rate Cut; Indian Futures Slide

By Patrick Rial and Masaki Kondo

Nov. 27 (Bloomberg) -- Asian stocks rose after China slashed interest rates by the most in more than a decade to spur growth. Indian stock futures slumped after terrorist attacks killed 80 people in Mumbai, the nation's financial hub.

BHP Billiton Ltd., which doubled sales to China in the last two years, climbed 5.5 percent after the nation's biggest interest-rate cut in 11 years drove up commodity prices. Komatsu Ltd., which controls 17 percent of China's excavator market, added 4.7 percent. Futures on the S&P CNX Nifty index of Indian stocks lost 1.8 percent in Singapore after gunmen armed with rifles and grenades raided five-star hotels in the country's first terrorist attack targeting foreigners.

The MSCI Asia Pacific Index gained 1.5 percent to 81.30 as of 10:14 a.m. in Tokyo, a third consecutive advance. The gauge is still down 49 percent in 2008 as the financial crisis sparked a global recession.

The People's Bank of China yesterday cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan. In addition, the European Union proposed a 200 billion euro ($259 billion) spending package.

China is the largest trading partner for Japan and Australia and was the biggest contributor to global economic growth last year. The Nikkei 225 Stock Average advanced 2.7 percent to 8,432.86. Other equity benchmarks open for trading also climbed.

Paul Volcker

U.S. stocks jumped yesterday as the Standard & Poor's 500 Index erased an early decline to rally 3.5 percent, bringing its four-day gain to 18 percent. President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head an economic advisory board, boosting investor confidence.

Volcker's nomination ``made Obama's economic policies more defined,'' Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. ``Investors are waiting for authorities to implement more measures to support the economy.''


BHP gained 5.5 percent to A$28.75. The company supplies commodities such as iron ore to China for use in steel production. Komatsu, the world's second-largest maker of construction machinery, rose 4.7 percent to 1,073 yen. Fortescue Metals Group Ltd., which sells iron ore to two of China's five largest steelmakers, rallied 9.9 percent to A$1.89.

``This is by far the most aggressive move PBOC has ever done in our memory,'' said Xue Lan, Hong Kong-based head of China research at Citigroup, said in a report. ``We believe market could have found a short-term bottom, and that a more aggressive strategy will pay off.''

Panasonic Earnings

Credit losses and writedowns at financial companies nearing $1 trillion have prompted central banks and governments to cut interest rates and boost spending to stem a global economic contraction. The International Monetary Fund predicted this month the U.S., Europe and Japan may have their first simultaneous recession in the post-World War II era.

Crude oil for January delivery advanced 7.2 percent yesterday to settle at $54.44 a barrel in New York, paring losses to 63 percent from a record $147.27 on July 11. Copper futures for March delivery rose 2.3 percent.

Panasonic Corp., which had its shares downgraded by Merrill Lynch & Co., dropped by 4.1 percent to 1,292 yen. The world's largest maker of consumer electronics will cut its full-year operating profit forecast by more than 30 percent, national broadcaster NHK reported today without citing anyone.

``The global economy is still deteriorating and this isn't the time yet for investors to feel reassured,'' said Ichiyoshi's Akino. ``The thin trading volumes show how unsure people are about the market outlook.''

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