Asian Stocks Advance for Second Day as Outlook for Europe Crisis Improves

By Shani Raja and Yoshiaki Nohara - Oct 7, 2011 1:31 PM GMT+0700
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Passersby stand in front of the Australia Securities Exchange (ASX Ltd.) electronic stock board in Melbourne, Australia. Asian stocks advanced as optimism European officials will protect banks from the region’s debt crisis boosted the earnings outlook for lenders and exporters. Photographer: Luis Enrique Ascui/Bloomberg

Asian stocks rose, sending a regional benchmark index toward its biggest two-day gain in two years, as optimism European officials will protect banks from the region’s debt crisis boosted the earnings outlook for lenders and exporters.

National Australia Bank Ltd. (NAB), the nation’s largest lender to businesses, gained 3.9 percent in Sydney. Hutchison Whampoa Ltd., which owns ports in Germany and Spain, surged 10 percent in Hong Kong after saying its operations in Europe are “very resilient.” Toyota Motor Corp., Asia’s No. 1 automaker, advanced 0.4 percent in Tokyo, while in Seoul, Samsung Electronics Co. rose 0.6 percent. BHP Billiton Ltd. (BHP), the world’s largest mining company, jumped 2.5 percent in Sydney after commodity prices increased.

The MSCI Asia Pacific Index rose 2 percent to 112.87 as of 3:17 p.m. in Tokyo, set for a 5.2 percent two-day gain, the steepest since April 2009. About three stocks advanced for each that declined on the measure, which was headed for a 0.2 percent decline this week. The gauge tumbled 16 percent in the third quarter, the biggest drop since 2008, amid concern that Europe’s debt crisis and a U.S. economic slowdown will drag the world back into recession.

“It certainly sounds like policy makers in Europe are understanding the situation with the banking system and getting more willing to recapitalize the banks,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. “But we haven’t seen that yet. I think it is a real risk until we see an announcement.”

Capital Injection

Japan’s Nikkei 225 (NKY) Stock Average gained 1 percent, extending a 1.7 percent advance yesterday. South Korea’s Kospi Index added 2.9 percent and Australia’s S&P/ASX 200 rose 2.3 percent, to cap its biggest weekly gain in a year. Hong Kong’s Hang Seng Index advanced 2.6 percent.

The European Commission is pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek default.

Banks in Europe rallied after European Central Bank President Jean-Claude Trichet said the ECB will resume covered- bond purchases -- assets backed by mortgages or public-sector loans -- and reintroduce yearlong loans for banks, while defying calls for an interest-rate cut and acknowledging “downside risks” to the economy have intensified.

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. In New York yesterday, the index advanced 1.8 percent, capping its biggest three-day rally since August after Treasury Secretary Timothy F. Geithner said U.S. banks have strengthened.

U.S. Jobs

A Labor Department report also showed U.S. unemployment- benefit claims rose less than forecast last week to a level that shows companies may be starting to slow the pace of dismissals. A government release today may show employers added 55,000 workers to payrolls in September, and the unemployment rate held at 9.1 percent, according to the median forecast of economists surveyed by Bloomberg News.

National Australia Bank rose 3.9 percent to A$23.76 in Sydney and Mitsubishi UFJ Financial Group Inc., Japan’s biggest listed bank by market value, climbed 0,6 percent to 328 yen in Tokyo. Toyota added 0.4 percent to 2,549 yen and Samsung advanced 0.6 percent to 860,000 won.

Hutchison Whampoa gained to 10 percent to HK$62.95 in Hong Kong. Li & Fung Ltd., the world’s biggest supplier of clothes and toys to retailers, surged 6 percent to HK$12.80.

Commodity Shares

Commodity stocks advanced for a second day after crude oil for November delivery rose 3.7 percent in New York yesterday, and the Thomson Reuters/Jefferies CRB Index of raw materials advanced 2 percent.

BHP Billiton gained 2.5 percent to A$37.20 and rival Rio Tinto Group climbed 4.9 percent to A$66.40, set for the biggest three-day gain since 2009. Korea Zinc Co., which produces metals including zinc, lead and gold, jumped 15 percent to 282,500 won in Seoul.

Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, rose 2 percent to A$35.76 in Sydney after gold futures for December delivery advanced 0.7 percent yesterday in New York. Zijin Mining Group Co. gained 15 percent to HK$2.42 in Hong Kong.

The MSCI Asia Pacific Index dropped 20 percent this year through yesterday, compared with a 7.4 percent loss by the S&P 500 and a 17 percent decline by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.3 times estimated earnings on average, compared with 11.7 times for the S&P 500 and 9.7 times for the Stoxx 600.

Among stocks that declined today, Sony Corp. dropped 3.7 percent to 1,415 yen in Tokyo. The consumer electronics manufacturer is getting closer to an agreement to buy Ericsson AB’s stake in their mobile-phone venture, the Wall Street Journal reported, citing people familiar with the matter. Nomura Holdings Inc. separately cut Sony’s rating to “neutral” from “buy.”

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net;

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net