By Jonathan Burgos and Patrick Rial
March 19 (Bloomberg) -- Asian stocks gained for a fifth day as an unexpected U.S. Federal Reserve plan to buy $300 billion of Treasuries spurred optimism lower borrowing costs will revive economic growth.
Commonwealth Bank of Australia added 2.1 percent in Sydney after the central bank said the country has more scope to respond to the economic slump. Zijin Mining Group Co., China’s largest gold producer, climbed 5.2 percent in Hong Kong after bullion rallied on speculation the Fed’s action will revive inflation and weaken the dollar. Honda Motor Corp., which gets 51 percent of sales in North America, lost 2.6 percent on concern a stronger yen will hurt the value of overseas sales.
“The move boosted confidence the Fed will be able to check the recession,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co. in Tokyo, which oversees about $5.5 billion. “But on a net basis, it’s negative because of the fear that confidence in the dollar could collapse.”
The MSCI Asia Pacific Index rose 1.8 percent to 79.67 as of 11:58 a.m. in Tokyo. The gauge has jumped 13 percent since closing at the lowest in more than five years on March 9 as banks including Barclays Plc and Standard Chartered Plc reported “strong” starts to the year.
Japan’s Nikkei 225 Stock Average fell 0.6 percent to 7,922.89, led by exporters including Honda and Toyota Motor Corp. China’s Shanghai Composite Index gained 0.5 percent and Australia’s S&P/ASX 200 Index added 0.7 percent.
China Huiyuan Juice Group Ltd. plunged 41 percent in Hong Kong after Chinese regulators blocked Coca-Cola Co.’s $2.3 billion takeover bid. Casio Computer Co., the maker of G-Shock watches and Exilim cameras, tumbled 14 percent as it forecast its first loss in seven years.
Bond Purchases
Futures on the Standard & Poor’s 500 Index fell 0.7 percent. The gauge rose 2.1 percent in New York yesterday after the Fed’s announcement, bringing its rally since March 9 to 17 percent.
The Fed said it will purchase $300 billion in Treasury securities and an additional $750 billion of mortgage securities. The Fed will use newly created money to fund the purchases, increasing the supply of funds in the market and helping to drive down rates.
Governments from the U.S. to Japan are stepping up efforts to bolster economic growth hampered by the worst financial crisis since the Great Depression. Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said on March 10 the global economy will contract this year in the worst performance “in most of our lifetimes.”
Central Bank Action
The MSCI Asia Pacific Index has slumped 41 percent in the past year as the global recession decimated profits at Asia’s export-dependent economies. Earnings estimates for companies included in the benchmark gauge have declined 65 percent in the past 12 months, data compiled by Bloomberg show.
Commonwealth Bank, Australia’s largest mortgage lender, gained 2.1 percent to A$33.38. Investment bank Macquarie Group Ltd. surged 5.6 percent to A$23.89. Policy makers and the government have more scope than most other countries to respond to the worsening slump in the global economy, Malcolm Edey, Assistant Governor of the Reserve Bank of Australia, said.
Mitsubishi UFJ Financial Group Ltd. rose 1.9 percent to 487 yen in Tokyo, where the Bank of Japan said yesterday it will increase bond purchases from banks. Mizuho Financial Group Ltd., Japan’s second-biggest lender, gained 1.5 percent to 209 yen.
“The liquidity injections from the Fed and the Bank of Japan have boosted sentiment in the market,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “People may start to take profit on this bear-market rally. We’re still a long way from the end of this crisis.”
Dollar Tumbles
Zijin surged 5.2 percent to HK$4.86 in Hong Kong. Newcrest Mining Ltd., Australia’s largest gold producer, jumped 4.4 percent to A$32.74 after gold futures in New York climbed 5 percent in after-hours trading.
BHP Billiton Ltd., the world’s biggest mining company and Australia’s No. 1 oil company, rose 0.9 percent to A$31.46. Copper futures in New York jumped 2.3 percent today, while oil gained 2.5 percent. Inpex Corp., Japan’s largest oil explorer, climbed 2.3 percent to 682,000 yen.
Honda slumped 3.5 percent to 2,220 yen as the dollar tumbled to as low as 95.67 yen today from 98.51 at the close of market trading yesterday in Tokyo. A weaker dollar reduces the profitability of revenue generated abroad for Japan’s exporters.
Toyota Motor Corp., which gets 37 percent of sales from North America, lost 2.2 percent to 2,965 yen.
Huiyuan, China’s biggest domestic juicemaker, plummeted 41 percent to HK$4.91. The Ministry of Commerce said Coca-Cola’s proposed takeover would have been “negative for competition.”
Casio dropped 14 percent to 640 yen. The company predicted a net loss of 23 billion yen ($239 million) in the year to March 31, compared with its forecast last month for profit of 1.5 billion yen. Goldman Sachs Group Inc. and Nomura Holdings Inc. cut their recommendations on Casio stock.
To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
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