Most Asian Stocks Rise, Led by Mining Shares; Kospi Declines

By Jonathan Burgos

May 25 (Bloomberg) -- Most Asian stocks rose as gains in metal prices boosted mining companies and health-care stocks rallied. South Korean shares fell after North Korea conducted a nuclear test.

BHP Billiton Ltd., the world’s biggest mining company, added 1.2 percent in Sydney after a measure of metals traded in London climbed the most in two weeks on May 22. Shionogi & Co. jumped 5.7 percent, pacing advances by health-care stocks, after the Nikkei newspaper reported the company aims to sell a new drug for influenza as early as 2010. LG Electronics Inc., the world’s third-largest maker of mobile phones, sank as much as 6.3 percent in Seoul after what North Korea described as a “successful” underground nuclear test today.

More than five stocks advanced for every four that declined on the MSCI Asia Pacific Index, which was little changed at 99.37 at 7:17 p.m. in Tokyo. The gauged has rallied 41 percent from a more than five-year low on March 9. South Korea’s Kospi sank 0.2 percent, having earlier dropped 6.3 percent.

“The market has rallied so much,” said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. “Investors will take profit on any sign of bad economic news or political jitters. We need a bigger catalyst for this rally to be sustainable.”

Japan’s Nikkei 225 Stocks Average added 1.3 percent, paring an earlier 1.9 percent climb. North Korea also launched short- range missiles, Yonhap News reported, without saying where it obtained the information.

Commodity Prices

Ishikawa Seisakusho Ltd., which makes weapons for national defense forces, soared 17 percent in Tokyo on speculation demand for its products will rise because of a more aggressive North Korea. Singapore Petroleum Co. surged 20 percent after PetroChina Co. agreed to buy a stake. Goodman Group, Australia’s largest industrial real estate investment trust, sank 13 percent after regulators lifted an eight-month ban on short-selling financial companies.

Futures on the Standard & Poor’s 500 Index were little changed. Markets are closed in the U.S. today for a public holiday. The gauge fell 0.2 percent in New York on May 22. BankUnited Financial Corp. was shut by federal regulators and its assets were sold in the largest U.S. bank failure this year.

BHP added 1.2 percent to A$33.87 in Sydney. Mitsubishi Corp., a trading housing that gets more than half of its profit from commodities, advanced 1.3 percent to 1,750 yen in Tokyo.

A gauge of six metals in London advanced 2.7 percent on May 22, the most since May 6. Copper futures in New York climbed 2.3 percent, while gold added 0.8 percent.

“With higher commodity prices, resource-related shares will stay resilient,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co. in Tokyo.

‘More Defensive’

Shionogi jumped 5.7 percent to 1,952 yen. The Osaka-based pharmaceutical company is currently analyzing phase 3 test data for the drug Peramivir, a company spokesman said, confirming the Nikkei report.

LG closed 1.4 percent lower at 109,500 won while steelmaker Posco lost 0.6 percent to 396,000 won as North Korea’s Korean Central News Agency said the nuclear test would “bolster its nuclear deterrent for self-defense.” The won earlier fell by the most in more than a week.

Renewed military hostility from North Korea threatens to prolong an economic contraction that has erased about $3 trillion from Asian markets since Sept. 30, 2008. Japan, which has proposed $264 billion in spending to revive the economy, and South Korea both said they were setting up task forces in response to the test.

North Korea’s test “can push people back into a more defensive mode until the dust settles,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The geopolitical backdrop is going to be very important given markets have had a huge run.”

Singapore Petroleum

The MSCI Asia Pacific has climbed 41 percent since slumping to a more than five-year low on March 9 amid speculation the worst of the financial crisis had passed. Stocks included in the measure were valued at an average 1.4 times the book value of assets as of May 22, 17 percent higher from the end of 2008.

Ishikawa Seisakusho soared 17 percent to 70 yen. Howa Machinery Ltd., a maker of firearms, climbed 9.1 percent to 60 yen.

North Korea’s first nuclear weapons test on Oct. 9, 2006, sent the MSCI Asia index down 0.5 percent. The gauge rebounded to finish the month up 2.9 percent and rose 3.1 percent in both November and December of that year.

Singapore Petroleum surged 20 percent to S$6.05. PetroChina said yesterday it will buy 234.5 million shares at S$6.25 per share from Keppel Corp. Keppel, the world’s biggest builder of oil rigs, climbed 4.6 percent to S$7.28.

Short-Selling Targets

Singapore’s Straits Times Index added 1 percent, resuming price updates after an unspecified disruption that had been investigated by index compiler FTSE Group.

PetroChina, the country’s largest oil producer, lost 0.8 percent to HK$8.32 in Hong Kong.

In Sydney, Goodman Group slumped 13 percent to 21 cents. Macquarie Office Trust, an office property trust, slipped 6.5 percent to 14.5 cents. Suncorp Metway Ltd., which offers banking and insurance services, slid 2.9 percent to A$6.07.

The companies were among those that took advantage of the country’s ban on shorting financial stocks to sell shares while shielded from “bear raids,” where successive short sales drive stock prices lower. Australian companies have raised $21 billion in equity sales this year, according to a Financial Times report that cited Dealogic research.

“Investors recognize the level of risk associated with financial companies’ near-term profits,” said Angus Gluskie, who manages about $230 million at White Funds Management Pty. in Sydney. “Consequently, they are being viewed as reasonable short-selling targets at present.”

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.