Asian Stocks Rise, Set for Second-Biggest Weekly Gain This Year

By Patrick Rial and Saeromi Shin

Nov. 28 (Bloomberg) -- Asian stocks rose, driving the region's benchmark index to its second-best week this year, on optimism steps by governments to pull the world's economy out of recession will boost demand for raw materials and heavy equipment.

BHP Billiton Ltd., Australia's largest oil producer, added 7.6 percent as crude headed for the best week in five months. Komatsu Ltd. jumped 6.9 percent in Tokyo on speculation demand for its excavators will increase in China, which lowered interest rates this week. The cost of protecting bonds from default in the region fell.

``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 advanced 1.5 percent to 82.66 at 4:01 p.m. in Tokyo. The measure has rallied 6.8 percent this week, a performance only beaten this year by the 6.9 percent rally at the end of October, when central banks from Japan to Taiwan lowered borrowing costs.

China's central bank cut interest rates by the most in 11 years, three weeks after the government announced a stimulus plan worth more than $500 billion. The 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 ($258 billion) spending package.

The gain pared November's drop to 3.8 percent, the seventh monthly decline and the longest losing streak since the gauge began in December 1987.

Panasonic Earnings

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan, including the Thai government and Hutchison Whampoa Ltd., fell 2.5 basis points to 365 at 12:45 p.m. in Hong Kong.

Japan's Nikkei 225 Stock Average added 1.7 percent to 8,512.27 today. Gains were limited as Panasonic Corp. slumped to a five-year low after slashing its profit outlook as the country's recession deepened. U.S. markets were closed yesterday for the Thanksgiving holiday.

India's Sensitive Index dropped 0.2 percent as stocks traded for the first time since militant attacks that started on Nov. 26 in Mumbai left as many as 125 people dead. Hotel and airline stocks led declines.

``The aim of the attackers will have been to deter foreign businessmen and indeed foreign fund managers from visiting India,'' CLSA Ltd.'s chief strategist Christopher Wood wrote in a report. ``Sadly, those efforts will in part be successful.''

Commodity Producers

BHP rose 7.6 percent to A$31. Rio Tinto Group jumped 8.8 percent to A$46.60 after Morgan Stanley resumed coverage of the world's third-largest mining company with an ``overweight'' rating. Mitsui & Co., which generates the most profit from oil among Japan's trading companies, advanced 8.3 percent to 846 yen.

Crude oil rose 7.1 percent this week, the most since June, to trade at $53.45 recently. Gold traded near a five-week high as federal funds futures showed traders see a rate cut from the Federal Reserve on Dec. 16 as a certainty. Gains in commodities helped Australia's S&P/ASX 200 rally by a record 9.5 percent this week.

Ministers from the Organization of Petroleum Exporting Countries, which supply 40 percent of the world's oil, are meeting tomorrow for the third time in as many months to discuss a further cut in production to shore up prices. Russia, with the third-largest reserves globally, said this week it will coordinate with OPEC on prices.

`Overweight' China

Komatsu gained 6.9 percent to 1,144 yen. Aluminum Corp. of China, the country's largest producer of the metal, rose 4.9 percent to HK$3.46. China Railway Group Ltd., Asia's biggest construction company, gained 2.6 percent to HK$5.19.

Chinese companies listed in Hong Kong also gained after BNP Paribas said investors should ``overweight'' such shares.

``Demographics, rural land reform and healthcare spending bode well for China's gradual shift to a consumption-driven economy,'' Erwin Sanft, head of China and Hong Kong equities at BNP, wrote in a note to clients. The nation's ``stocks look cheap in a global context for the first time in five years.''

Panasonic lost 11 percent to 1,144 yen, the lowest close since June 2003. The world's biggest maker of consumer electronics yesterday reduced its annual net income, saying demand and prices have fallen as the U.S. financial crisis spread across the globe.

Nomura Securities Co. and HSBC Holdings Plc cut their ratings on Panasonic. Nomura also lowered its recommendations on Sony Corp. and Sharp Corp., citing tumbling television prices.

Japan Recession

Panasonic joins Toyota Corp. and Nintendo Co. in cutting earnings forecasts this month as the nation's exports declined, companies reduced production, consumers spent less and fewer people looked for work. Japan's economy shrank for a second quarter in the three months ended Sept. 30, entering the first recession since 2001.

``The degree of this downward revision is certainly far worse than what we and consensus had expected,'' Carlos Dimas at HSBC wrote in a note to clients. ``The slump in demand for consumer electronics overseas is deepening beyond already pessimistic expectations.''

Indian Hotels Ltd., the nation's biggest hotel operator and which manages one of the hotels that was attacked, plunged 13 percent to 42.2 rupees in Mumbai. Jet Airways (India) Ltd., the nation's largest domestic airline, slumped 4.6 percent to 131.4 rupees. Kingfisher Airlines Ltd., the second biggest, tumbled 5.8 percent to 27.55 rupees.

Kyocera Corp., the world's biggest maker of ceramic packaging for chips, soared 17 percent to 5,960 yen after saying yesterday it plans to buy back 4.2 percent of its shares.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net