Asian Stocks, Currencies Gain on Rates, Resources; Korea Jumps

Oct. 30 (Bloomberg) — Asian stocks bonds and currencies surged after China, Taiwan and the U.S. cut interest rates to boost bank lending and economic growth. The MSCI Asia Pacific Index headed for the biggest three-day gain in 16 years.

South Korea’s Kospi index gained a record 10 percent, led by Korean Air Lines Co. and SK Energy Co., after the U.S. Federal Reserve agreed to provide the nation with $30 billion in a currency swap. The won surged the most in more than a decade. BHP Billiton Ltd. climbed as commodities rallied. Toyota Motor Corp. added 6.3 percent as a weaker yen boosted its earnings outlook.

“Cutting interest rates is the most effective card you can play at this point,” said Chang In Whan, chief executive officer of KTB Asset Management Co. in Seoul, which manages the equivalent of $4.3 billion. Chang said he is a “strong buyer” of stocks. “The U.S. liquidity-swap agreement shows that it won’t just sit back and watch overseas markets go down.”

The MSCI Asia Pacific Index added 4.6 percent to 84.41 as of 12:21 p.m. in Tokyo, set to complete its biggest three-day gain since August 1992. Today’s advance pared the monthly loss to 21 percent, the worst month since the measure’s creation in 1987.

Japan’s Nikkei 225 Stock Average climbed 3.9 percent to 8,530.77 as Softbank Corp. gained by its daily limit. South Korea’s Kospi index rose 10 percent, the most since the index was created in January 1980.

Hong Kong’s Hang Seng Index advanced 5.5 percent, led by Ping An Insurance (Group) Co. and Industrial & Commercial Bank of China Ltd. the city’s monetary authority lowered its base rate to 1.5 percent from 2 percent. Three-month Hibor dropped 15 basis points to 3.39 percent, according to the 11 a.m. fixing by the Hong Kong Association of Banks.

Liquidity, Stimulus

Futures on the U.S. Standard & Poor’s 500 Index rose 1.3 percent today. U.S. stocks declined yesterday, with the benchmark index erasing a 3.1 percent advance in the final 12 minutes, on concern lower interest rates won’t stem a recession.

Central banks across the globe are trying to curb an economic slowdown as the financial crisis weighs on consumer sentiment and business spending. The Fed and the People’s Bank of China yesterday cut interest rates to stimulate demand, while Taiwan and Hong Kong’s central banks lowered their rates today.

Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, rose 6.9 percent to NT$44.90 in Taipei, leading Taiwan’s Taiex Index 4.3 percent higher following the rate cut. Cathay Financial Holdings Co., the island’s biggest financial-services company, advanced 7 percent to NT$32.95.

Ping An, China’s second-biggest insurance company, soared 14 percent to HK$29.85 in Hong Kong. ICBC, the world’s biggest bank by market value, climbed 7 percent to HK$3.46. The Hong Kong Monetary Authority cut its base rate to 1.5 percent form 2 percent, tracking the Fed’s reduction.

BHP, Toyota

Korean Air, South Korea’s biggest carrier, jumped by the daily limit of 15 percent to 32,350 won. SK Energy, the largest South Korean oil refiner, surged 15 percent to 63,200 won. A stronger won reduces the dollar-denominated fuel bills of airlines and refiners.

The Fed said yesterday it agreed to provide $30 billion each to the central banks of South Korea, Singapore, Brazil and Mexico, “four large systemically important economies,” in a statement. The currency-swap arrangements aim “to mitigate the spread of difficulties in obtaining U.S. dollar funding.”

Mizuho Financial Group Inc., Japan’s second-biggest bank by assets, rose 4 percent to 215,200 yen. Sumitomo Mitsui Financial Group Inc., the third largest, added 6.2 percent to 361,000 yen.

Japan’s Prime Minister Taro Aso will announce economic stimulus measures worth 5 trillion yen ($51 billion) today, the Yomiuri newspaper said. The package will include 2 trillion yen in assistance for households, according to the report.

Rallies Fizzle

MSCI’s Asian index hasn’t managed a four-day advance since July. Recent rallies fueled by government guaranteeing bank deposits and coordinated interest-rate reductions by the world’s central banks have fizzled as losses from mortgage-related investments climbed to almost $680 billion.

BHP, the world’s biggest mining company, advanced 6.3 percent to A$27.95 in Sydney. Rio Tinto Group, the third largest, gained 6.1 percent to A$75.10.

Copper futures for December delivery surged 12 percent in New York yesterday, the steepest jump in two years, while crude oil for December delivery climbed 7.6 percent to $67.50 a barrel.

Cnooc Ltd., China’s biggest offshore oil and gas producer, jumped 14 percent to HK$5.71 in Hong Kong, set to round off a three-day, 37 percent rally. PetroChina Co., Asia’s biggest oil producer, gained 9.8 percent to HK$5.40.

Softbank, Japan’s third-largest mobile-phone company, rose by the stock’s daily maximum of 100 yen, rising 13 percent to 850 yen. The company said its operating profit, or sales minus the cost of goods sold and administrative expenses, will increase 24 percent next fiscal year as it adds users and reduces expenses.

Weaker Yen

Toyota, Japan’s largest automaker, advanced 5.4 percent to 3,690 yen. Nintendo Co., the world’s largest maker of handheld game consoles, climbed 9.8 percent to 30,300 yen in Osaka. A strengthening yen had led companies including Canon Inc. and Sony Corp. to reduce profit targets in the past week.

The yen fell 1.4 percent from late yesterday in New York to 98.75 per dollar and 3.7 percent to 130.91 per euro as the rise in stocks gave investors confidence to buy higher yielding assets. The Australian dollar rose 5 percent from late Asian trading to 68.22 U.S. cents.

The South Korean won, which two days ago sank to a decade- low 1,495 won per dollar, jumped 10.6 percent to 1290.50 as Finance Minister Kang Man Soo said the government is seeking currency swap deals with Japan and China, after sealing the pact with the Fed. Default protection costs on South Korean government debt fell by the most in more than four years, dropping 130 basis points to 435.

Korean Bonds

“The swap program will address lingering concerns among investors about the adequacy of Korea’s foreign reserves,” said Kwon Goohoon, an economist with Goldman Sachs Group Inc. in Seoul. “The swap program will also likely help facilitate the rollover of foreign debt by local banks.”

Korea’s government bonds rose on optimism that the central bank will lower borrowing costs once the currency market stabilizes. The yield on the 5.5 percent note due June 2011 fell 4 basis points, or 0.04 percentage point, to 4.48 percent, according to Korea Exchange.

“The swap deal removed the biggest headache, problems of foreign currency shortage,” said Kong Dong Rak, a fixed income strategist with Hana Daetoo Securities Co. in Seoul. “It will enable the central bank to push ahead with more rate cuts as the currency market regains stability.”

The Bank of Korea cut the benchmark interest rate by a record 75 basis points to 4.25 percent this week.

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