Asian Stocks Gain as Gold Rises to Record; BHP, Newcrest Climb

By Shani Raja

Oct. 7 (Bloomberg) -- Asian stocks rose for a second day, led by mining companies and banks, as gold prices surged to a record and brokerages upgraded companies including Sumitomo Mitsui Financial Group.

BHP Billiton Ltd., the world’s biggest mining company, gained 3.4 percent and gold producer Newcrest Mining Ltd. surged 6.5 percent in Sydney. The country’s benchmark index posted its biggest gain in six weeks after the central bank raised interest rates, saying the justification for low rates “has now passed.” Sumitomo Mitsui Financial Group Inc. jumped 6.7 percent in Tokyo after Nomura Holdings Inc. raised its share-price target.

“The improvement in Asian stocks can be attributed to further evidence the global economy is on the mend,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “Investors waiting for a pullback to increase equity exposure continue to be disappointed.”

The MSCI Asia Pacific Index gained 1.5 percent to 117.36 as of 1:59 p.m. in Tokyo, extending yesterday’s 1.7 percent advance. The gauge has risen 63 percent in the past seven months on signs the global economy is emerging from its worst slowdown since World War II.

Australia’s S&P/ASX 200 Index climbed 2.4 percent, set for its biggest gain since Aug. 24. It rose 0.4 percent yesterday after the central bank’s unexpected interest-rate increase. Crane Group Ltd., the country’s biggest distributor of plumbing supplies, gained 2.1 percent on a Credit Suisse Group AG upgrade.

U.S. Earnings

Japan’s Nikkei 225 Stock Average increased 1.2 percent as Hitachi Ltd., a nuclear reactor maker, added 8.4 percent after Mizuho Securities Co. raised its recommendation and Mitsui O.S.K. Lines Ltd. advanced 3.9 percent after a gauge of shipping fees increased the most since July. Hong Kong’s Hang Seng Index rose 1.9 percent, while Taiwan’s Taiex Index gained 0.6 percent.

Futures on the U.S. Standard & Poor’s 500 Index added 0.3 percent. The gauge added 1.4 percent yesterday on speculation third-quarter earnings will top estimates. Alcoa Inc. is scheduled to release third-quarter results later today, the first company in the Dow Jones Industrial Average to report.

Material stocks accounted for 21 percent of the MSCI Asia Pacific Index’s advance today after gold futures climbed as much as 2.7 percent to a record $1,045 an ounce in New York, while copper increased for a second day with a 2.1 percent increase. Crude oil rose 0.7 percent.

BHP gained 3.4 percent to A$37.91, while Rio Tinto Group, the world’s third-largest mining company, climbed 5.2 percent to A$60.75. Newcrest, Australia’s largest gold producer, jumped 6.5 percent to A$35.08. Inpex Corp., Japan’s largest oil explorer, rose 2.7 percent to 753,000 yen.

Dollar Decline

Raw-material prices climbed as the dollar’s decline spurred demand for commodities as a hedge against inflation. The Dollar Index, which measures the U.S. currency against six major counterparts, traded near a two-week low as speculation the Federal Reserve will trail other central banks in raising interest rates made the greenback less attractive.

“Commodities are priced in dollars and a weak U.S. currency inevitably raises their prices,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Gains in commodities are generally positive for resource companies.”

The dollar weakened to as much as 88.65 yen from 88.98 at the 3 p.m. close of Tokyo stock trading yesterday. The U.S. currency’s decline came as Australia’s surprise interest-rate hike yesterday boosted demand for higher-yielding assets.

Signs of Growth

The Reserve Bank of Australia’s decision to lift the overnight cash rate target to 3.25 percent from a 49-year low of 3 percent followed the first expansion this year in U.S. service industries. Manufacturing in emerging markets increased the most in the past three months since the second quarter of 2008, according to the HSBC Emerging Markets Index of data from purchasing managers.

Speculation of a global recovery has driven the MSCI Asia Pacific Index up by 66 percent from a more than five-year low on March 9. That’s lifted the average price of companies on the gauge to 23 times estimated earnings from 21 times at this year’s trough.

“The weight of conviction is edging towards the recovery view,” said Michael Auyeung, who manages about $500 million as chief investment officer at Pacific Mutual Fund Bhd. in Petaling Jaya, outside Kuala Lumpur. “The stop-start nature of some of the economic data flows should be expected, but the trends are discernibly more to the upside.”

Japanese Banks

Sumitomo Mitsui, Japan’s second-largest publicly traded bank by market value, jumped 6.7 percent to 3,370 yen, while market leader Mitsubishi UFJ Financial Group Inc. climbed 6.1 percent to 504 yen. Nomura raised its price estimate on Sumitomo Mitsui by 8.9 percent to 4,900 yen, saying the bank was starting to cut costs to boost profit.

Hitachi climbed 8.4 percent to 296 yen after Mizuho Securities raised its investment rating on the company to “strong buy” from “hold.” Australia’s Crane rose 2.1 percent to A$10.76 after Credit Suisse upgraded the stock to “neutral” from “underperform.”

Mitsui O.S.K., Japan’s No. 2 shipping line, added 3.9 percent to 537 yen. Smaller rival Kawasaki Kisen Kaisha Ltd. gained 3.9 percent to 343 yen. The Baltic Dry Index, a measure of shipping costs for commodities, rose 3.3 percent yesterday in London, the steepest climb since July 16.

To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.