By Patrick Rial and Chua Kong Ho
Nov. 10 (Bloomberg) -- Asian stocks rallied for the first time in three days and U.S. index futures jumped after China announced a $586 billion package to revive growth in the world’s fourth-largest economy.
Hitachi Construction Machinery Co., which generates a sixth of its sales in China, soared 19 percent in Tokyo after the Chinese government announced infrastructure spending, tax deductions and farming subsidies. BHP Billiton Ltd., the world’s largest mining company, rose 7 percent as prices for oil and copper surged. Anhui Conch Cement Co., China’s biggest maker of the building material, climbed 31 percent in Hong Kong.
“It’s a big number and it’ll add to growth,” said Mark Tan, who helps oversee about $3 billion in Asian equities at UOB Asset Management in Singapore and has recently been adding to his stock holdings. “We’re not out of the woods yet, but China has the most resources among major economies to boost growth.”
The MSCI Asia Pacific Index gained 3.1 percent to 89.95 as of 7:49 p.m. in Tokyo. The gauge is still down 43 percent in 2008 as the credit crisis slows global growth, denting demand for Asian exports. Group of 20 leaders said yesterday governments need to use monetary and fiscal policy to support expansion, including new spending and lower interest rates.
Shares on MSCI’s Asian benchmark index are valued at 11 times trailing earnings, compared with a peak of 19 times in November 2007, when investors postulated the region would be able to avoid the fallout from the credit crisis that originated in the U.S.
Japan’s Nikkei 225 Stock Average surged 5.8 percent to 9,081.43. Australia’s S&P/ASX 200 Index gained 1.4 percent as the country’s central bank signaled it’s ready to cut interest rates. New Zealand’s NZX 50 Index rose 1.7 percent following the election of John Key, a former Merrill Lynch & Co. trader, as prime minister.
Stimulus Package
Futures on the Standard & Poor’s 500 Index climbed 2.7 percent today after a person familiar with the matter said American International Group Inc. may get an expanded government rescue package worth more than $150 billion. The S&P advanced 2.9 percent on Nov. 7 as traders bet the Federal Reserve will cut interest rates in the face of rising unemployment.
China’s CSI 300 Index rallied 7.4 percent, the most since Sept. 19, while Hong Kong’s Hang Seng advanced 3.5 percent.
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.
Chinese ‘New Deal’
Hitachi Construction, the world’s largest maker of giant excavators, rallied by its daily limit of 19 percent to 1,252 yen. Kubota Corp., Japan’s largest maker of agricultural equipment which reported a doubling in sales to China last week, soared 17 percent to 547 yen. Doosan Heavy Industries & Construction Co., South Korea’s largest power-equipment maker, jumped 15 percent to 67,600 won.
Anhui Conch surged 31 percent to HK$35.50. China Railway Group Ltd., Asia’s biggest construction company, rose 10 percent to 5.18 yuan in Shanghai. China Construction Bank, the nation’s second-largest lender, rose 7.7 percent to HK$4.34 in Hong Kong.
“Beijing’s new policy drive of upgrading infrastructure, rural land reforms, and expansion of social welfare is akin to a ‘New Deal’ with Chinese characteristics,” Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co., said in an e-mail. “Despite the growth risks to China’s economy, we believe the stock market will start to anticipate the positive impact of the government’s fiscal stimulus program.”
Commodities Rally
BHP added 7 percent to A$29.89. Jiangxi Copper Co., China’s second-biggest smelter, jumped 19 percent to HK$5.10 in Hong Kong. Mitsui & Co., Japan’s second-largest trading company, climbed 5.1 percent to 991 yen. It gets more than half of its profit from trading commodities.
Crude oil for December delivery gained as much as 5.3 percent to $64.30 in after-hours trading today. Copper futures jumped 6.2 percent, while gold added 2.1 percent.
China’s stimulus measures also helped the Australian and New Zealand dollars to advance as investors resumed bets on high-yielding currencies. The two countries’ currencies have dropped more than 20 percent this year as the credit crisis sapped demand for higher-yielding financial assets.
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 necessary measures, including monetary and fiscal policy.
Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows among their economies, Russian Finance Minister Alexei Kudrin said in an interview.
Rate Cut
“Given demand is waning, government spending will be a welcome boost to economies,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.
Taiwan’s central bank lowered its benchmark interest rate for the fourth time in two months, effective today. The move failed to stem a drop in the nation’s equity market. Australia’s central bank signaled it is ready to cut rates further as the weakening economy forced it to slash its growth outlook.
Stocks worldwide have fallen this year on concern the global economy will fall into a recession after the collapse of the U.S. mortgage market triggered a credit crisis. The rout has wiped out $29 trillion of stock-market value and slashed the MSCI World Index by 40 percent.
Sustained Rally?
Previous rallies have run out of steam since the beginning of the credit crisis in June 2007 as profit concerns and deteriorating economic data trumped bets that the worst is over. The MSCI Asia index has climbed 20 percent from a five-year low reached last month.
The International Monetary Fund last week predicted the first simultaneous recession in the U.S., Japan and euro region in the post-World War II era and called for more interest-rate cuts and fiscal stimulus.
“With lower expectations for global growth and apprehension regarding China’s outlook, the stimulus package came as a welcome surprise for the market,” said Fujio Ando, who helps oversee $365 million at Chiba-Gin Asset Management in Tokyo. “However, I’d like to see what the exact measures are going to be as some things such as infrastructure spending look similar to what the government has already been saying.”
Babcock & Brown
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.
Babcock & Brown Ltd., the Australian asset manager struggling to repay debt, plummeted 24 percent to 76 cents after agreeing to give up its right to manage the investment fund Babcock & Brown Capital Ltd. in return for fees totaling A$50 million ($34.4 million).
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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