Asian Stocks Climb as China Unveils $586 Billion Stimulus Plan

By Masaki Kondo and Patrick Rial

Nov. 10 (Bloomberg) -- Asian stocks rallied for the first time in three days after China announced a $586 billion economic stimulus package and Taiwan cut interest rates.

Rio Tinto Ltd., which gets about a fifth of its sales in China, added 7 percent after the country unveiled measures including infrastructure spending, tax deductions and farming subsidies. Macquarie Group Ltd., Australia’s biggest investment bank, jumped 4.2 percent after Group of 20 leaders called for interest-rate cuts and higher spending to bolster global growth. Toyota Motor Corp. added 1.7 percent after Japanese machinery orders rose more than forecast in September from a month earlier.

“Governments and businesses are working on solutions to the slowdown plaguing economies and earnings, which may bring us some positive surprises,” said Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. “Given demand is waning, government spending will be a welcome boost to economies.”

The MSCI Asia Pacific Index gained 1.3 percent to 88.36 as of 9:11 a.m. in Tokyo. The gauge is still down 44 percent in 2008 as the credit crisis slows global growth, denting demand for Asian exports.

Japan’s Nikkei 225 Stock Average surged 4 percent to 8927.64. Australia’s S&P/ASX 200 Index gained 2.1 percent. New Zealand’s NZX 50 Index rose 1.4 percent following the election of John Key, a former trader at Merrill Lynch & Co., as prime minister.

Stimulus Package

Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The gauge advanced 2.9 percent on Nov. 7, the first gain in three days, as traders bet the Federal Reserve will cut interest rates in the face of rising unemployment.

China plans to spend 4 trillion yuan ($586 billion) by 2010 to support growth in its domestic economy as the rest of the world slows, the Beijing-based State Council said yesterday on its Web site. The funds are equivalent to almost a fifth of the nation’s gross domestic product.

The Group of 20 nations said yesterday after a meeting in Sao Paulo that it’s ready to act “urgently” to bolster economic growth, and that governments must take all measures, which include monetary and fiscal policy. Taiwan’s central bank lowered its benchmark interest rate for the fourth time in two months, effective today.

Concerns linger that the worldwide economy will fall into a recession after the collapse of the U.S. mortgage market triggered a credit crisis. The MSCI World Index has lost 41 percent of its value so far this year, and $29 trillion has been wiped off from global stock markets.

In the U.S., the jobless rate rose to 6.5 percent in October, the highest level since 1994, the Labor Department reported on Nov. 7. There is a 97 percent chance the Fed will cut its interbank lending rate at its Dec. 16 meeting, according to futures on the Chicago Board of Trade.

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