Asian Stocks Advance on China Rate Cut; Indian Trading Halted
By Patrick Rial
Nov. 27 (Bloomberg) — Asian stocks advanced for a third day after China lowered interest rates by the most in 11 years to spur economic growth.
hina Vanke Co., the country’s biggest builder, jumped 6.5 percent on speculation lower borrowing costs will encourage home purchases. BHP Billiton Ltd. gained 5.7 percent in Sydney as commodities rallied for a second day. Komatsu Ltd., which controls 17 percent of China’s excavator market, added 4.4 percent. Markets in India were closed after terrorists killed more than 100 people in Mumbai, the nation’s financial hub.
The MSCI Asia Pacific Index gained 1.8 percent to 81.55 as of 4:12 p.m. in Tokyo, a third consecutive advance. More than three stocks advanced for each one that declined.
“Countries like China still have the weapons and flexibility to control the economy,” said Masahiko Ejiri, who manages Asian equities at Mizuho Asset Management Co., which oversees $26 billion in Tokyo. “For some countries the political risk seems too big, so I would avoid them even if I see value. It’s much safer to have exposure to stable countries.”
The People’s Bank of China yesterday cut its one-year lending rate by 108 basis points to 5.58 percent, less than three weeks after announcing a 4 trillion yuan ($586 billion) economic stimulus plan.
China’s economy is deteriorating more quickly as the impact of the global financial crisis spreads, underscoring the need for “forceful” measures to support growth, the nation’s top planner said today. The country foreign-exchange reserves topped $2 trillion for the first time, the statistics bureau’s chief economist said, giving the nation more resources to take action.
China Trading Partners
China is the largest trading partner for Japan, South Korea and Australia and was the biggest contributor to global economic growth last year. The Nikkei 225 Stock Average advanced 2 percent to 8,373.39, while China’s CSI 300 Index added 3 percent. All other equity benchmarks open for trading rose, except Vietnam and Thailand.
Taiwan, which counts China as its biggest market, posted the region’s second-steepest gain as Hon Hai Precision Industry Co. led a 4.3 percent advance in the Taiex index.
Indian S&P CNX Nifty Index futures for November delivery fell 1.5 percent in Singapore after terrorist shootings and blasts across the city killed 101 people and left 287 injured. Regulators in India closed the Bombay Stock Exchange and National Stock Exchange, along with bond, foreign exchange, commodities and money markets, following the violence in Mumbai.
U.S. stocks jumped yesterday as the Standard & Poor’s 500 Index erased an early decline to rally 3.5 percent, bringing its four-day gain to 18 percent. President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head an economic advisory board, boosting investor confidence. Futures on the S&P lost 0.8 percent in Asian trading and the nation’s markets will be closed today for the Thanksgiving holiday.
Shares in the MSCI Asia index trade at 5 times cash flow, compared with 5.6 times for companies in the S&P 500. During the last three years Asian stocks have traded at an average of 9.5 times and fell to a record low of 4.3 times last month. more