Asia Stocks Snap Four-Day Loss Streak as ECB Cuts Rates, Greece Backs Down

By Jonathan Burgos - Nov 4, 2011 4:28 PM GMT+0700

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Nov. 4 (Bloomberg) -- Amit Rajpal, a Hong Kong-based portfolio manager at Marshall Wace LLP, talks about his investment strategy for China's banks. Rajpal also discusses Europe's debt crisis and banking industry. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Asian stocks rose for the first time in five days as Greece scrapped a plan to hold a referendum on a bailout package and the European Central Bank cut interest rates, reducing concern the debt crisis will spur a credit crunch.

HSBC Holdings Plc (HSBA), Europe’s No.1 lender by market value, climbed 3.2 percent in Hong Kong. Komatsu Ltd. (6301), Asia’s largest maker of construction equipment by market value, surged 6.9 percent after a report showed orders at American factories increased in September. China Petroleum & Chemical Corp. (386), China’s biggest oil refining company by sales, led the nation’s energy companies higher on speculation the government may allow the mainland’s fuel producers to adjust prices on their own.

“There’s less risk today because people are little less concerned that Greece will run on its own direction,” Michael Vogelzang, chief investment officer at Boston Advisors LLC, told Bloomberg Television. “It sounds like there is some progress and the markets moved up. We think the ECB moves were helpful. It’s better to aggressively attack these issues than sit idly by.”

The MSCI Asia Pacific Index increased 2.5 percent to 120.33 as of 6:25 p.m. in Tokyo, snapping four days of losses. The measure sank 3.5 percent this week, the most since Sept. 23. Stocks tumbled in the last four days after Prime Minister George Papandreou announced on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on Europe’s rescue pact.

Japan’s Nikkei 225 Stock Average gained 1.9 percent as it resumed trading following a holiday yesterday. South Korea’s Kospi Index climbed 3.1 percent. Australia’s S&P/ASX 200 jumped 2.6 percent. Hong Kong’s Hang Seng Index (HSI) increased 3.1 percent, while China’s Shanghai Composite Index added 0.8 percent.

‘Doves Increasing’

Futures on the Standard & Poor’s 500 Index were little changed today, erasing a loss of as much as 0.4 percent. In New York, the index climbed 1.9 percent yesterday, as ECB officials unanimously lowered benchmark interest rate by 25 basis points to 1.25 percent.

“The ECB cut interest rates and the doves are increasing in the U.S. Federal Reserve Board,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Expectations that monetary policies in Europe and the U.S. will be further relaxed would boost stock markets. We still don’t know Greece will accept Europe’s bailout plan so we need to determine this point.”

Financial stocks were the biggest contributors to the MSCI Asia Pacific Index’s advance today after Greek Finance Minister Evangelos Venizelos said the nation won’t hold a referendum.

HSBC, StanChart

HSBC climbed 3.2 percent to HK$67.60 in Hong Kong. Standard Chartered Plc (STAN), the U.K.’s second-largest lender by market value, gained 2.8 percent to HK$177.70.

Construction machinery makers and other industrial companies advanced after a report showed factory orders in the U.S. unexpectedly increased in September.

Komatsu surged 6.9 percent to 1,970 yen. Hitachi Construction Machinery Co., a maker of bulldozers and crawler cranes, climbed 5.6 percent to 1,537 yen. Fanuc Corp. (6954), which makes industrial robots, rose 4.3 percent to 12,880 yen.

Gauges of raw material producers and energy companies led the advance among the 10 industry groups in the Asian benchmark index after a gauge of six metals including copper and aluminum rose for a second day in London yesterday. Crude oil for December delivery gained 1.7 percent in New York.

China Fuel Prices

BHP Billiton Ltd. (BHP), the world’s biggest mining company, advanced 3.9 percent to A$37.95 in Sydney. Glencore International Plc, the world’s largest commodities trader, rose 2.7 percent to HK$54.30 in Hong Kong. Jiangxi Copper Co., China’s No. 1 producer of the metal, increased 5.1 percent to HK$19.44.

China’s energy companies rallied in Hong Kong after the China Securities Journal reported the mainland government, which controls fuel prices, would allow oil refiners to independently make “appropriate” price changes.

Sinopec, as the oil refiner is known, surged 8.3 percent to HK$7.92. PetroChina Co., the nation’s biggest energy company, advanced 3.9 percent to HK$10.04.

“Oil companies will for the first time be allowed to adjust prices by themselves, which could certainly help them cut refining losses,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “The new mechanism is a step forward from the old one, providing more certainty and transparency to the market and oil companies.”

Missed Estimates

The MSCI Asia Pacific Index declined 15 percent this year through yesterday, compared with a 0.3 percent gain by the S&P 500 and a 12 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 12.5 times estimated earnings on average, compared with 12.7 times for the S&P 500 and 10.4 times for the Stoxx 600.

Asian stocks have fallen this week as companies from Panasonic Corp. to Sony Corp. (6758) predicted losses. Of the 430 companies in the regional benchmark index that reported results since Oct. 11, 205 missed analysts’ estimates, while 150 exceeded expectations, according to data compiled by Bloomberg.

Sony, Japan’s biggest exporter of consumer electronics, tumbled 7.9 percent to 1,400 yen, the most since March 15. The company predicted a full-year loss of 90 billion yen ($1.2 billion) because of a strong yen, waning television sales and flooding in Thailand.

“The fundamental issue is not external factors, but rather the need to create products and a business model that can differentiate Sony from the competition,” Yoshiharu Izumi, an analyst with JPMorgan Chase & Co. said in a report. He cut the company’s rating to “neutral” from “overweight.”

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.