Equities gaining for sixth straight week

SYDNEY - Asian stocks rose for a sixth week on speculation policy makers will do more to spur economic growth after Japan's central bank cut its benchmark interest rate and Australia unexpectedly kept its key rate unchanged.

Mitsubishi UFJ Financial Group Inc, Japan's largest bank by market value, surged 3.6 percent in Tokyo after the Bank of Japan pledged to keep its rate at "virtually zero" and expand purchases. BHP Billiton Ltd, the world's biggest mining company, gained 3.9 percent in Sydney on optimism demand for commodities will increase. China Shenhua Energy Co, a unit of the nation's largest coal producer, climbed 6.7 percent in Hong Kong after China said it will seek to boost domestic demand.

The MSCI Asia Pacific Index rose 2.4 percent last week to 130.13, and climbed to a two-year high on Oct 7. The gauge had its biggest quarterly increase of the past year in the three months to September amid signs the US economy is regaining momentum and that China's economic expansion will continue.

Target rate

"Investor sentiment has been buoyed by the surprise decision by the Bank of Japan," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd in Melbourne. "We're starting to get a second wave of stimulus measures in major economies at a time when investors had previously thought the strength of the global recovery was waning."

Hong Kong's Hang Seng Index climbed 2.6 percent in the past five days. Australia's S&P/ASX 200 Index gained 2.2 percent after the Reserve Bank of Australia's Oct 5 announcement on interest rates. South Korea's Kospi index rose 1.1 percent.

Japan's Nikkei 225 Stock Average rose 2 percent. The Bank of Japan pledged Oct 5 to expand its balance sheet by 5 trillion yen ($60 billion), aiming to shore up the nation's slowing economic recovery. It lowered the benchmark interest rate to a range of zero percent to 0.1 percent from the previous 0.1 percent target.

Mitsubishi UFJ climbed 3.6 percent in Tokyo and Mizuho Financial Group Inc, Japan's third-biggest bank by market value, jumped 6.7 percent to 127 yen. Sumitomo Mitsui Financial Group Inc, the No 2, rose 2.2 percent to 2,502 yen.

"The Bank of Japan's action may accelerate movements toward monetary easing globally," said Hiroichi Nishi, general manager of the equities division at Tokyo-based Nikko Cordial Securities Inc. "Confidence grew that the global economy is on a recovery track, and investors will likely put money back into risk assets."

China demand

BHP Billiton, which counts China as its largest market for sales, rose 3.9 percent to A$41 ($40) in Sydney. Alumina Ltd jumped 9.7 percent to A$1.985 in Sydney. It surged 3.9 percent on Oct 8, after partner Alcoa Inc, the largest US aluminum producer, reported third-quarter profit that topped analysts' expectations. CNOOC Ltd, China's third-largest oil producer, climbed 6.9 percent to HK$16.08 in Hong Kong.

China Shenhua advanced 6.7 percent to HK$34.25 after Chinese Premier Wen Jiabao said in an interview with CNN that the nation will stimulate domestic demand to stabilize and further expand its economy. China Mobile Ltd, the world's biggest phone carrier by customers, gained 3.2 percent to HK$82.

China's non-manufacturing industries expanded at a faster pace in September behind increases in construction and consumer spending. A purchasing managers' index released Oct 3 by the China Federation of Logistics and Purchasing rose to 61.7 from 60.1 in August.

Also boosting Asian stocks last week was a Chinese government report that showed retail and catering sales jumped 18.7 percent during the Oct 1 to Oct 7 holidays from the same period a year ago. Separately, Moody's Investors Service said it put China's A1 debt rating on review for a possible upgrade.

Virgin Blue Holdings Ltd, Australia's second-largest airline, climbed 6.9 percent to 46.5 Australian cents in the week after Reserve Bank of Australia Governor Glenn Stevens kept the overnight cash rate target at 4.5 percent on Oct 5, as forecast by only six of 25 economists surveyed by Bloomberg News. Stevens said it's likely higher borrowing costs will be needed "at some point".

The MSCI Asia Pacific Index has risen about 20 percent from this year's low on May 25 and has gained more than 7 percent in 2010 on speculation profit growth will weather Europe's debt crisis, China's steps against property-price gains and concern about the pace of the US recovery.

The International Monetary Fund said Oct 6 that high unemployment, public debt and fragile banking systems pose risks to global prosperity, urging policy makers to take bolder steps to ensure a sustained recovery. The world economy will expand 4.2 percent next year, the Washington-based IMF said, down from its forecast of 4.3 percent three months ago. The fund projects growth of 4.8 percent this year, up from 4.6 percent.

Bloomberg News

(China Daily 10/11/2010 page14)