Asian Shares Rise for Second Week on Interest Rate Cuts, Oil

By Chan Tien Hin and Shani Raja

Dec. 20 (Bloomberg) -- Asian stocks rose for a second week as the U.S., Japan and Hong Kong cut interest rates and oil prices tumbled, boosting optimism costs for companies will fall and help resuscitate economic growth.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, gained 16 percent in Tokyo, while Sumitomo Mitsui Financial Group Inc. surged 17 percent. Qantas Airways Ltd. jumped 18 percent in Sydney as crude oil slumped below $34 a barrel. Samsung Electronics Co. climbed 5.3 percent as the benchmark gauge of memory prices climbed for the first time since June.

“Falling interest rates are helping,” said Hans Kunnen, head of investment market research at Colonial First State Global Management, which manages $86 billion. “Anything that helps get us back onto a growth path or ease the pain of the slowdown will be good for stocks.”

The MSCI Asia Pacific Index advanced 6.1 percent to 89.5 this week, and has gained 8.3 percent in December, putting it on course for its first monthly advance since April. Finance and technology stocks led gains among the gauge’s 10 industry groups this week.

MSCI’s Asian index is still down 43 percent for the year, the worst annual performance in its two-decade history, as the global financial crisis has dragged the world’s biggest economies into recession. Losses and writedowns tied to the collapse the U.S. subprime-mortgage market rose above $1 trillion this week.

Rate Cuts

Analysts have cut their average earnings-per-share estimate for companies on the index by 26 percent since the beginning of the year, data compiled by Bloomberg shows. Honda Motor Co., Japan’s second-largest automaker, this week cut its profit forecast as sales in North America and Europe dropped and the yen rose to a 13-year high against the dollar.

The U.S. Federal Reserve on Dec. 16 cut its benchmark interest rate to a record low and said it will employ “all available tools” to revive the world’s largest economy. The Hong Kong Monetary Authority followed the next day with a 1 percentage-point cut in its key rate.

The Bank of Japan yesterday lowered its target for the overnight lending rate to 0.1 percent from 0.3 percent and said it would buy corporate debt as a deepening recession chokes off funding for businesses.

“The Fed and central banks around the world have been cutting rates very aggressively,” said David Ng, who oversees $1.6 billion as chief investment officer at Hwang-DBS Investment Management Bhd. “It effectively puts more money into consumers’ pockets. In an environment when people are not spending and when there are fears over deflation, central banks and governments are doing all they can to throw money at people.”

Oil Tumbles

Banks paced gains in Asia this week amid speculation lower borrowing costs will stimulate lending growth. Mitsubishi UFJ rose 16 percent to 560 yen. Sumitomo Mitsui Financial surged 17 percent to 391,000 yen. Hana Financial Group Inc., the parent of South Korea’s No. 4 lender, added 15 percent to 21,850 won.

Airlines advanced as fuel expenses declined. The deepening global recession has sapped oil demand, giving crude prices their biggest weekly drop since the Persian Gulf War in 1991.

Qantas, Australia’s largest airline, jumped 18 percent in the week to A$2.64. Singapore Airlines Ltd., Southeast Asia’s largest carrier, surged 10 percent to S$12.16.

Samsung Electronics Co. climbed 5.3 percent to 489,500 won Prices of the benchmark DRAM chip on Dec. 18 climbed 12 percent, the first increase since June, according to Dramexchange Technology Inc., Asia’s biggest spot market for chips.

“Production cutbacks are triggering sentiment that chip prices won’t decline further,” Jay Kim, an analyst at Hyundai Securities Co., wrote in a note. “Output reductions are sending a message that supply growth at the end of the year and early 2009 will slow significantly.”

Honda, Japan’s second-largest automaker, slid 5.9 percent this week to 1,807 yen. The company cut its full-year forecast by 62 percent on Dec. 17.

To contact the reporters for this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.