Asian Stocks Advance on China Rate Cut; Indian Trading Halted

By Patrick Rial

Nov. 27 (Bloomberg) -- Asian stocks advanced for a third day after China lowered interest rates by the most in 11 years to spur economic growth.

China Vanke Co., the country's biggest builder, jumped 3.1 percent on speculation lower borrowing costs will encourage home purchases. BHP Billiton Ltd. gained 5.7 percent in Sydney as commodities rallied for a second day. Komatsu Ltd., which controls 17 percent of China's excavator market, added 4.4 percent. Markets in India were closed after terrorists killed more than 100 people in Mumbai, the nation's financial hub.

The MSCI Asia Pacific Index gained 1.7 percent to 81.48 as of 5:12 p.m. in Tokyo, a third consecutive advance. More three stocks advanced for each that declined.

``Countries like China still have the weapons and flexibility to control the economy,'' said Masahiko Ejiri, who manages Asian equities at Mizuho Asset Management Co., which oversees $26 billion in Tokyo. ``For some countries the political risk seems too big, so I would avoid them even if I see value. It's much safer to have exposure to stable countries.''

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.

China's economy is deteriorating more quickly as the impact of the global financial crisis spreads, underscoring the need for ``forceful'' measures to support growth, the nation's top planner said today, prompting stock indexes to pare gains. The country foreign-exchange reserves topped $2 trillion for the first time, the statistics bureau's chief economist said, giving the nation more resources to take action.

China Trading Partners

China is the largest trading partner for Japan, South Korea and Australia and was the biggest contributor to global economic growth last year. The Nikkei 225 Stock Average advanced 2 percent to 8,373.39, while China's CSI 300 Index added 1.5 percent. All other equity benchmarks open for trading rose, except Vietnam, Thailand, Singapore and Indonesia.

Taiwan, which counts China as its biggest market, posted the region's steepest gain as Hon Hai Precision Industry Co. led a 4.3 percent advance in the Taiex index.

Indian S&P CNX Nifty Index futures for November delivery fell 3.5 percent in Singapore after terrorist shootings and blasts across the city killed 101 people and left 287 injured. Regulators in India closed the Bombay Stock Exchange and National Stock Exchange, along with bond, foreign exchange, commodities and money markets, following the violence in Mumbai.

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. Futures on the S&P lost 0.8 percent in Asian trading and the nation's markets will be closed today for the Thanksgiving holiday.

Share Values

Shares in the MSCI Asia index trade at 5 times cash flow, compared with 5.6 times for companies in the S&P 500. During the last three years Asian stocks have traded at an average of 9.5 times and fell to a record low of 4.3 times last month.

China Vanke climbed 3.1 percent to 7.01 yuan. Poly Real Estate Group Co., the second-biggest Chinese developer, added 1 percent to 17.56 yuan. Lower financing costs may boost demand for property in China, where housing prices grew at the slowest pace in more than three years last month.

Komatsu, the world's second-largest maker of construction machinery, rose 4.4 percent to 1,070 yen. Doosan Infracore Co., South Korea's largest construction-equipment maker and which exports more to China than any other market, surged 10 percent to 13,100 won.

Commodities Producers

BHP gained 5.7 percent to A$28.80. The company supplies commodities such as iron ore to China for use in steel production. Inpex Corp., Japan's biggest oil explorer, surged 10 percent to 573,000 yen. Aluminum Corp. of China, the nation's largest producer of the metal, jumped 3.5 percent to HK$3.30.

China is the world's largest consumer of copper, aluminum, iron ore and zinc. Copper futures for March delivery increased 0.8 percent in after-hours trading, extending yesterday's 2.3 percent gain. Oil gained 7.2 percent yesterday, before declining 2.5 percent today.

More than half of stocks in Asia have sunk below their book value as the collapse of the U.S. housing market curbed consumer spending on Asian-made goods and reduced demand for fuel and other commodities. The U.S. economy, the world's largest, is forecast to contract 2.05 percent this quarter, according to economists. MSCI's Asian index has tumbled by 48 percent this year as the global economy slipped into recession.

Panasonic, Fuji Heavy

Panasonic Corp., the world's largest maker of consumer electronics, fell 4.7 percent to 1,284 yen. After Japan's market closed, the company reduced its annual net income target by 90 percent and operating profit estimate by 39 percent.

National broadcaster NHK earlier reported that Panasonic would cut its full-year operating profit forecast by more than 30 percent.

Fuji Heavy Industries Ltd., the maker of Subaru cars, plunged 10 percent to 287 yen after saying it will slash auto production by 40,000 units next quarter as demand slows.

South Korean stocks rose after the government posted a record current account surplus of $4.91 billion in October, which may help ease pressure on the won, Asia's worst-performing currency this year. Additionally, the Bank of Korea said today it will receive $4 billion from the Federal Reserve, using its currency-swap line for the first time to provide U.S. dollars to local banks struggling to secure foreign funds.

Hyundai Motor Co., South Korea's largest automaker, gained 4.6 percent to 41,000 won, while Hynix Semiconductor Inc., the world's No. 2 computer-memory maker, added 15 percent to 6,950 won.

Korea Funds

In Taiwan, Hon Hai, the world's largest contract manufacturer of electronics, rose 6.9 percent to NT$62.4 after denying reports it will cut staff at its Hong Kong-listed unit.

Leighton Holdings Ltd. rallied 8.4 percent to A$22.12 after the Dubai unit of Australia's largest building company won a A$3.75 billion ($2.4 billion) contract to build a university campus.

In Thailand, Bangkok's international airport remained closed for a second day following its seizure by protesters. Prime Minister Somchai Wongsawat rebuffed a call from the army chief to step down and hold early elections. The country's SET index fell 1.3 percent.

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