Asia Stocks Rise on Expectation U.S. Spending Will Boost Growth

By Patrick Rial and Masaki Kondo

Jan. 7 (Bloomberg) -- Asian shares rose, driving the regional benchmark index to a two-month high, after President- elect Barack Obama said the U.S. will run deficits for years, lifting speculation government spending will restore growth.

Rio Tinto Group, the world’s No. 3 mining company, surged 8.1 percent after copper prices jumped the most in a month. Isuzu Motors Ltd., Japan’s third-biggest maker of commercial vehicles, soared 7.1 percent as the weakening yen lifted overseas sales prospects. Ricoh Co., Japan’s second-largest maker of office equipment, rallied 12 percent after Credit Suisse Group boosted its rating, citing copier demand in North America.

The MSCI Asia Pacific Index jumped 2.2 percent to 92.85 as of 9:58 a.m. in Tokyo, the highest since Nov. 5. About three shares climbed for each that retreated on the gauge, with consumer-related and materials companies accounting for 40 percent of the advance. The benchmark has gained 3.6 percent in 2009 after posting a record 43 percent decline last year.

“Hopes Obama will revive the U.S. economy continue to support the market,” Hiroichi Nishi, a Tokyo-based equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. “Though the yen may strengthen today, the current level is weak enough to ease deep-rooted concerns about Japanese corporate earnings.”

Japan’s Nikkei 225 Stock Average added 2.4 percent to 9,295.64, rising for a seventh-straight day. Benchmarks throughout the region advanced except in New Zealand. U.S. stocks climbed yesterday, with the Standard & Poor’s 500 Index gaining 0.8 percent. S&P futures rose 0.1 percent in trading today.

Tax Cuts

Obama, who takes office on Jan. 20, said he expects to inherit a $1 trillion budget deficit and that similar shortfalls are in store “for years to come.” He’s pushing for tax cuts worth $500 for individuals, according to a House Democratic aide, and his economic stimulus plan includes the largest infrastructure investment since the 1950s.

Rio jumped 8.1 percent to A$46.95. Mitsui & Co., Japan’s second-largest trading company, soared 8 percent to 1,048 yen. Fortescue Metals Group Ltd., Australia’s third-largest iron-ore producer, climbed 9.4 percent to A$2.34.

Copper futures for March delivery jumped 8.5 percent in New York, the most since Dec. 8, amid speculation the spending package will lift demand for materials. A measure of six metals traded in London jumped 4.6 percent.

“Right now, as of today, I would rather buy a basket of oversold industrial commodities” than gold, said Marc Faber, publisher of the Gloom, Boom & Doom Report. Faber, who successfully predicted the 1987 stock crash as well as the rally in the dollar in 2008, spoke in an interview with Bloomberg Television.

Hitachi Metals Ltd., a maker of specialty steel, soared 14 percent to 563 yen. Posco, Asia’s third-largest steelmaker, advanced 3.6 percent to 420,500 won in Seoul.

Exporting Companies

Iron ore, a raw material used in steelmakers’ furnaces, has risen 24 percent since Oct. 31, when it fell to the lowest in three years, according to data compiled by industry publication Metal Bulletin. That indicates steel is set for a “tentative recovery,” according to Michael Rawlinson, head of mining, resources and energy at London-based brokerage Liberum Capital Ltd.

The Japanese currency depreciated to as low as 94.63 in global trading yesterday, the weakest level since Dec. 1, from 93.15 at the close of Tokyo stock trading. A weaker yen boosts the value of overseas sales for Japanese exporters. The currency strengthened to 93.63 today.

Isuzu Motors added 13 percent to 142 yen. Nidec Corp., the world’s biggest maker of disk-drive motors, soared by its 500 yen daily limit, or 14 percent, to 4,200 yen. Daikin Industries Ltd., Japan’s biggest maker of air conditioners, rose 8.7 percent to 2,690 yen.

Ricoh Rating

Ricoh soared 12 percent to 1,352. Kunihiko Kanno, an analyst at Credit Suisse in Tokyo, lifted the stock to “outperform” from “neutral.”

The U.S. market “appears to be more stable than anticipated,” Kanno wrote in a report. “Compared with Europe, the US market focuses on higher-value-added products, and this could be a big advantage for Ricoh.”

Kawasaki Heavy Industries Ltd., a Japanese maker of trains, jumped 6.2 percent to 223 yen after the Nikkei newspaper reported it will build a factory to produce rechargeable storage batteries.

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