Asian Stocks Fluctuate as Japanese Banks Rise, China Banks Drop

By Shani Raja and Kana Nishizawa

Dec. 16 (Bloomberg) -- Asian stocks fluctuated as Japanese banks advanced on speculation they’ll have at least a decade to implement stricter capital rules, and Chinese lenders fell after a regulatory official said bad loans pose a long-term risk.

Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. surged more than 14 percent in Tokyo after the Nikkei newspaper said lenders will have at least 10 years to meet international rules on capital ratios. China Construction Bank Corp. sank 2.1 percent in Hong Kong and Bank of China Ltd. lost 1.5 percent. Vietnam’s benchmark index slumped 3.8 percent, the most in the Asia-Pacific region, after the nation’s central bank doused speculation it was injecting capital into local banks.

“A 10-year delay is pretty much the same as not doing it,” said Masaru Hamasaki, chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “If all the worries about capital raising and dilution disappear, it’s very likely that banks will gain back what they’ve lost.”

The MSCI Asia Pacific Index rose 0.2 percent to 119.58 as of 7:21 p.m. in Tokyo, with about as many stocks advancing as declining. The gauge has climbed 33 percent this year, set for its biggest annual gain since 2003, as governments supplied money and cut interest rates to revive global economic growth.

Japan’s Nikkei 225 Stock Average added 0.9 percent, paring a 1.4 percent gain after the Financial Services Agency said no agreement on capital ratios had been reached.

Vietnam Retreats

Hong Kong’s Hang Seng Index decreased 0.9 percent, and Australia’s S&P/ASX 200 Index lost 0.3 percent. The country’s economy expanded 0.2 percent in the three months through September, the Bureau of Statistics said today in Sydney. That was less than economists estimated. Vietnam’s VN Index slumped 3.8 percent.

“The central bank is not injecting capital into the commercial banking system,” because the State Bank of Vietnam is limiting credit growth to curb inflation, Governor Nguyen Van Giau was quoted as saying yesterday in a statement on the government’s Web site.

Futures on the Standard & Poor’s 500 Index rose 0.6 percent. In New York yesterday, the gauge declined for the first time in five days, losing 0.6 percent. Citigroup Inc., the only major lender still dependent on U.S. taxpayers, said it will sell at least $20.5 billion of equity and debt to repay government bailout funds. Credit-card delinquencies increased at JPMorgan Chase & Co.

Japanese Banks Surge

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, climbed 4.9 percent to 470 yen. Sumitomo Mitsui, the No. 2, added 14 percent to 3,030 yen. Mizuho, the third- biggest, jumped 15 percent to 182 yen. Japanese banks had the five biggest increases in the MSCI Asia Pacific Index, led by Mizuho, in the MSCI Asia Pacific Index.

The Basel Committee on Banking Supervision will begin to introduce rules requiring banks to raise their capital ratios from 2012 and give them a transition period of 10 years to 20 years, the Nikkei said, without citing anyone as the source of the information.

Mizuho had the weakest risk-adjusted capital ratio among 45 international banks, according to an analysis by Standard & Poor’s dated Nov. 20. Mizuho, Sumitomo Mitsui and Mitsubishi UFJ were all in the lowest of five groups, S&P said at the time.

Mitsubishi UFJ said this week it will sell as much as 1.03 trillion yen ($11 billion) of shares to shore up capital. The world’s largest financial companies have reported $1.7 trillion in losses and writedowns since the U.S. subprime-mortgage market collapsed in 2007, according to data compiled by Bloomberg.

‘Eased Concerns’

“The delay in stricter banking regulations eased concerns that major banks will need to raise capital,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc.

China Construction Bank declined 2.1 percent to HK$6.56 in Hong Kong and was the biggest drag on the MSCI Asia Pacific Index. Bank of China Ltd. retreated 1.4 percent to HK$4.10. Industrial & Commercial Bank of China Ltd. dropped 1.3 percent to HK$6.30.

China’s banks will face risks for a “long period of time” from bad loans and from lending concentrated in certain industries and customers, Wang Huaqing, disciplinary commissioner of the China Banking Regulatory Commission, said at a forum in Beijing today.

The MSCI Asia Pacific Index has climbed 69 percent from a more than five-year low on March 9 to yesterday, outpacing gains of 64 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark trade at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx.

‘Synchronous Growth’

“We’re moving to a more synchronous growth environment in 2010, but may see a moderation in the absolute levels of growth,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “There’ll be a reluctance to take large risky positions during a quiet period.”

Toyota Motor Corp., the world’s biggest carmaker, climbed 1.6 percent to 3,760 yen in Tokyo, after the Asahi newspaper said it may post a full-year profit. The automaker, which last month forecast a loss of 200 billion yen for the current business year, may be able to post a profit depending on the yen-dollar exchange rate, Asahi said, citing a person familiar with the situation who it didn’t name.

The company will some capital investments and take other steps to cut costs, according to the report. Nissan Motor Co. added 2.1 percent to 740 yen.

Santos, Inpex, Oil

Santos Ltd., Australia’s third-biggest oil and gas producer, gained 1.9 percent to A$13.87 and Inpex Corp., Japan’s largest oil explorer, advanced 1.5 percent to 659,000 yen.

Crude oil futures advanced, snapping their longest decline since 2001, as January contracts added 1.7 percent to settle at $70.69 a barrel in New York yesterday.

News Corp. advanced 2.7 percent to A$16.90 in Sydney after the stock was raised to “buy” from “hold” at Deutsche Bank AG. Iluka Resources Ltd., the world’s biggest zircon producer, rallied 1.8 percent to A$3.48 after it was boosted to “hold” from “sell” at ABN Amro Holding NV.

To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net