Asian Stocks Have Second-Best Week in 2008 on Stimulus Spending

By Chua Kong Ho

Nov. 29 (Bloomberg) -- Asian stocks had their second-best week this year after China slashed interest rates, spurring speculation government measures will pull the global economy out of recession and boost demand.

Inpex Corp., Japan’s largest energy explorer, jumped 26 percent in Tokyo after oil had its best week in six months. Zijin Mining Group Co., China’s largest gold producer, surged 25 percent as bullion climbed. Guangzhou R&F Properties Co. jumped 41 percent after China cut its key lending rate by the most in 11 years to revive the world’s fourth-largest economy, three weeks after the government announced a stimulus plan worth more than $500 billion.

“Sentiment is stabilizing,” said Kwon Hyeuk Boo, a fund manager at Daishin Investment Trust Management Co. in Seoul, which oversees about $1.4 billion in assets. “Investors are buying into expectations that support measures will keep coming. China’s strong will to support its economy is serving as a key catalyst to Asian markets.”

The MSCI Asia Pacific Index rose 6.8 percent to 82.67, the second-best gain this year, surpassed only by a 6.9 percent rally at the end of October, when central banks from Japan to Taiwan lowered borrowing costs. Commodities producers had the biggest gains among the 10 industry groups.

Elpida, Powerchip

Japan’s Nikkei 225 Stock Average advanced 7.6 percent to 8,512.27. Elpida Memory Inc., Japan’s biggest memory-chip maker, climbed 27 percent after saying it plans to gain control of a production venture with Taiwan’s Powerchip Semiconductor Corp.

Asian shares also climbed after the U.S. Federal Reserve committed $800 billion to unfreeze credit markets, while Citigroup Inc. received a $306 billion government rescue and the European Union proposed a 200 billion euro ($257 billion) spending package.

The gain for MSCI’s Asia Pacific index pared November’s drop to 3.8 percent, the seventh monthly decline and the longest losing streak since the gauge began in December 1987.

Australia’s S&P/ASX 200 Index surged a record 9.5 percent this week. India’s Sensitive Index rose 2 percent even as militant attacks that started Nov. 26 in Mumbai left more than 150 people dead. Thailand’s SET Index climbed 1.1 percent, lagging the regional rally, as the main international airport remained paralyzed for a fifth day after being seized by anti- government protestors.

Writedowns

MSCI’s Asian index has plunged 48 percent in 2008 as global financial companies’ losses and writedowns from the collapse of the U.S. subprime-mortgage market neared $1 trillion.

Shares on the MSCI gauge are now valued at 10.2 times trailing earnings after falling to as low as 8.2 times last month. That compares with 19.5 times on Nov. 11, 2007, when the measure hit a peak of 172.32. Prior to the current market turmoil, the price-earnings ratio never dropped below 10, according to Bloomberg data.

Inpex, Japan’s largest oil explorer, added 26 percent to 612,000 yen. Zijin Mining climbed 25 percent to HK$2.80. Sumitomo Metal Mining Co., Japan’s second-biggest copper smelter, rallied 30 percent to 908 yen after saying Nov. 21 it plans to buy back up to 2.83 percent of its outstanding shares through Dec. 19.

BHP Billiton Ltd. surged 42 percent to A$31 after abandoning a yearlong pursuit of rival mining company Rio Tinto Group and as the price of oil and metals rebounded. BHP blamed the rout in commodities prices and the credit-market squeeze for derailing the $66 billion bid.

Rio Rating

Rio Tinto slumped 22 percent to A$46.60 as Standard & Poor’s Ratings Service said it may downgrade the company’s credit rating because of its high level of debt and declining commodity prices.

Crude oil rose 9 percent this week, the most since March 2007. A measure of six metals traded on the London Metal Exchange, including copper and zinc, had the biggest weekly gain this month.

Guangzhou R&F gained 41 percent this week to HK$4.78, the most since its listing in July 2005. Sino-Ocean Land Holdings Ltd., which develops residential and commercial real estate in northern China, advanced 35 percent to HK$2.65.

“There’s certainly a lot of significance in the rate cut,” said Tahnoon Pasha, Hong Kong-based head of Asian equities at MFC Global Investment Management, which oversees $213 billion in assets globally. “It has a meaningful impact on the cost of borrowing for a number of relatively highly leveraged companies which run large balance sheets. These guys are going to see real improvement in their bottom lines because of the rate cut.”

People’s Bank

The People’s Bank of China Nov. 26 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 is the largest trading partner for Japan and Australia and was the biggest contributor to global economic growth last year.

The Chinese economy is deteriorating more quickly as the impact of the global financial crisis spreads, underscoring the need for “forceful” measures to support growth, said Zhang Ping, chairman of the National Development and Reform Commission, this week.

Komatsu Ltd. rose 14 percent to 1,144 yen on speculation demand for its excavators will increase in China. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, gained 22 percent to HK$3.54. China Railway Group Ltd., Asia’s biggest construction company, added 13 percent to HK$5.13.

Panasonic Shock

Panasonic Corp., the world’s largest consumer-electronics maker, declined 18 percent to 1,144 yen, the lowest since June 26, 2003, in Tokyo after slashing its full-year profit forecast by 90 percent, citing the global recession and a drop in product prices.

Elpida jumped 27 percent to 445 yen. The Tokyo-based chipmaker will increase its stake in joint venture Rexchip Electronics Corp. to 52 percent, Hsinchu-based Powerchip said Nov. 27. The investment will give Elpida control of a factory that runs on the latest technology for making computer-memory chips at a fraction of the cost of building a plant.

Indian Hotels Ltd., the nation’s biggest hotel operator and which manages one of the hotels that was attacked, plunged 16 percent to 40.15 rupees in Mumbai. Jet Airways (India) Ltd., the nation’s largest domestic airline, slumped 14 percent to 129.5 rupees.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net