Asian stocks rise most in a month on Fed rate cut, Toyota gains
Thursday, 20 September 2007
TOKYO, Sept. 19 (Bloomberg): Asian stocks climbed the most in a month after the U.S. Federal Reserve cut its benchmark lending rate by half a per centage point to bolster growth in the world's largest economy.
Toyota Motor Corp. climbed the most since May 2004, leading gains by companies that generate earnings in the US Mitsubishi UFJ Financial Group Inc. and National Australia Bank Ltd. advanced on speculation the Fed's rate decrease will ease a credit shortage that has made financial stocks the world's worst performers this year.
``There's a good chance the US will avoid a recession and that's behind this relief rally,'' said Leslie Phang, who helps oversee $1 billion at Commonwealth Private Bank in Singapore. ``Investors will be more confident taking on more risk.''
Hong Kong's Hang Seng Index closed above 25,000 for the first time, led by Sun Hung Kai Properties Ltd. after the city lowered rates in step with the Fed, spurring demand for property. India's Sensitive Index reached a record high.
The Morgan Stanley Capital International Asia-Pacific Index jumped 3.9 per cent to 154.83 as of 7:11 p.m. in Tokyo, the biggest gain since Aug. 20. About 11 stocks rose for each that fell. All Asian markets climbed except China and Sri Lanka.
The Nikkei 225 Stock Average surged the most since March 2002, climbing 3.7 per cent to 16,381.54 in Japan, where the central bank today keep its overnight lending rate at 0.5 per cent. Canon Inc. and Honda Motor Co. advanced after the yen weakened against foreign currencies, raising the value of overseas sales.
The US Standard & Poor's 500 Index yesterday climbed 2.9 per cent after the Fed lowered its key rate to 4.75 per cent from 5.25 per cent. The reduction, more than most economists in a Bloomberg survey predicted, was the first cut in four years.
Most Asian currencies rose against the dollar, led by a more than 1 per cent rise in the Indonesian rupiah, as the US rate cut gave investors confidence to buy higher-yielding investments. Indonesia's Jakarta Composite Index added 3.3 per cent.
Toyota, Japan's largest automaker, jumped 4.9 per cent to 6,700, its steepest climb since May 2004. The company made 35 per cent of its sales last year in North America. Samsung Electronics Co., South Korea's biggest company by market value, added 1.9 per cent to 552,000 won. The company accounted for about 16 per cent of South Korean exports last year.
Australia's BHP Billiton Ltd., the world's largest mining company, gained 4.6 per cent to A$40.44, a record. Taiwan Semiconductor Manufacturing Co., the largest maker of customized chips, added 1 per cent to NT$61.40.
``Markets are reacting explosively,'' said Lee Wonki, who oversees the equivalent of $2.2 billion as chief executive of KB Asset Management Co. in Seoul. ``Stocks had been oversold, and then we had this bigger-than-expected rate cut.''
MSCI's Asia-Pacific index, following a July-August sell-off on concern the widening credit crisis would derail the global economy, is down 4 per cent from July 24's record close of 161.40.
Of the past seven times the Fed has started a series of rate reductions, Asian stocks rose over the subsequent nine months on five occasions, Markus Rosgen, Citigroup Inc.'s Asian strategist said on Sept. 10.
Mitsubishi UFJ, Japan's biggest lender by assets, surged 6.1 per cent to 1.05 million yen, its biggest gain in almost two years. National Australia Bank, the country's largest lender, gained 2.6 per cent to A$38.20. ICICI Bank Ltd., India's second-largest lender, climbed 4.9 per cent to 970.40 rupees.
Macquarie Bank Ltd., Australia's largest investment bank, jumped 5.1 per cent to A$77.10. Macquarie said July 31 investors in two of its leveraged credit funds may lose 25 per cent of their money because of the turmoil in credit markets.
Of the MSCI World Index's 10 industry groups, only financial stocks have declined this year on concern losses from U.S. subprime mortgages resulting in tighter credit conditions will hurt earnings.
Hong Kong's Hang Seng climbed 4 per cent to 25,554.64, posting its biggest gain since Aug. 20. Sun Hung Kai Properties, Hong Kong's No. 1 developer by market value, climbed 6.3 per cent to a record HK$123.20. Cheung Kong (Holdings) Ltd., the second biggest, added 7.2 per cent to HK$128.60.
The Hong Kong Monetary Authority cut its base rate for overnight lending to 6.25 per cent from 6.75 per cent. The city's de facto central bank, which has tied its currency to the U.S. dollar since 1983, forms its base rate by adding 1.5 per centage points to the Fed's overnight lending rate. Lower borrowing costs spur demand for mortgages and property.
``In a falling-interest-rate environment, there will inevitably at some point be a requirement'' for local banks to lower mortgage rates, said Tahnoon Pasha, who oversees $2.2 billion as head of Asian equities at Manulife Asset Management in Hong Kong. ``A declining rate environment benefits developers in terms of the demand outlook for their products.''
Japan's exporters also gained after the yen weakened, boosting the value of overseas sales when converted into local currency. The yen traded at 115.87 to the dollar at the 3 p.m. end of stocks trading in Tokyo, from 114.89 at yesterday's close. The Japanese currency dropped to 161.97 against the euro from 159.16.
Canon, the world's biggest digital-camera maker, added 3.5 per cent to 6,300 yen. Honda, Japan's No. 2 automaker, gained 3.5 per cent to 3,890 yen. The company's annual operating profit gains about 13 billion yen ($112 million) for every 1 yen that Japan's currency weakens against the dollar, according to Koji Endo, a senior analyst at Credit Suisse Group in Tokyo.
Oil producers climbed as crude prices in New York traded above $82 a barrel. PetroChina Co., China's largest oil company, jumped 3.1 per cent to HK$11.96 in Hong Kong. Inpex Holdings Inc., Japan's No. 1 oil explorer, rose 8.9 per cent to 1.22 million yen.
Gold miners rose on the precious metal's advance to a 16- month high. Newcrest Mining Ltd., Australia's biggest gold mining company, climbed 6.7 per cent to A$28.06. Zijin Mining Group Co., which runs China's largest gold mine, gained 6.9 per cent to HK$10.48.
Cosmo Oil Co., Japan's fourth-largest refiner, surged 6.3 per cent to 578 yen after it said it will sell a 20.85 per cent stake to Abu Dhabi's state-controlled International Petroleum Investment Co. for 89.2 billion yen. The Middle Eastern nation will become Cosmo's largest shareholder.
Toyota Motor Corp. climbed the most since May 2004, leading gains by companies that generate earnings in the US Mitsubishi UFJ Financial Group Inc. and National Australia Bank Ltd. advanced on speculation the Fed's rate decrease will ease a credit shortage that has made financial stocks the world's worst performers this year.
``There's a good chance the US will avoid a recession and that's behind this relief rally,'' said Leslie Phang, who helps oversee $1 billion at Commonwealth Private Bank in Singapore. ``Investors will be more confident taking on more risk.''
Hong Kong's Hang Seng Index closed above 25,000 for the first time, led by Sun Hung Kai Properties Ltd. after the city lowered rates in step with the Fed, spurring demand for property. India's Sensitive Index reached a record high.
The Morgan Stanley Capital International Asia-Pacific Index jumped 3.9 per cent to 154.83 as of 7:11 p.m. in Tokyo, the biggest gain since Aug. 20. About 11 stocks rose for each that fell. All Asian markets climbed except China and Sri Lanka.
The Nikkei 225 Stock Average surged the most since March 2002, climbing 3.7 per cent to 16,381.54 in Japan, where the central bank today keep its overnight lending rate at 0.5 per cent. Canon Inc. and Honda Motor Co. advanced after the yen weakened against foreign currencies, raising the value of overseas sales.
The US Standard & Poor's 500 Index yesterday climbed 2.9 per cent after the Fed lowered its key rate to 4.75 per cent from 5.25 per cent. The reduction, more than most economists in a Bloomberg survey predicted, was the first cut in four years.
Most Asian currencies rose against the dollar, led by a more than 1 per cent rise in the Indonesian rupiah, as the US rate cut gave investors confidence to buy higher-yielding investments. Indonesia's Jakarta Composite Index added 3.3 per cent.
Toyota, Japan's largest automaker, jumped 4.9 per cent to 6,700, its steepest climb since May 2004. The company made 35 per cent of its sales last year in North America. Samsung Electronics Co., South Korea's biggest company by market value, added 1.9 per cent to 552,000 won. The company accounted for about 16 per cent of South Korean exports last year.
Australia's BHP Billiton Ltd., the world's largest mining company, gained 4.6 per cent to A$40.44, a record. Taiwan Semiconductor Manufacturing Co., the largest maker of customized chips, added 1 per cent to NT$61.40.
``Markets are reacting explosively,'' said Lee Wonki, who oversees the equivalent of $2.2 billion as chief executive of KB Asset Management Co. in Seoul. ``Stocks had been oversold, and then we had this bigger-than-expected rate cut.''
MSCI's Asia-Pacific index, following a July-August sell-off on concern the widening credit crisis would derail the global economy, is down 4 per cent from July 24's record close of 161.40.
Of the past seven times the Fed has started a series of rate reductions, Asian stocks rose over the subsequent nine months on five occasions, Markus Rosgen, Citigroup Inc.'s Asian strategist said on Sept. 10.
Mitsubishi UFJ, Japan's biggest lender by assets, surged 6.1 per cent to 1.05 million yen, its biggest gain in almost two years. National Australia Bank, the country's largest lender, gained 2.6 per cent to A$38.20. ICICI Bank Ltd., India's second-largest lender, climbed 4.9 per cent to 970.40 rupees.
Macquarie Bank Ltd., Australia's largest investment bank, jumped 5.1 per cent to A$77.10. Macquarie said July 31 investors in two of its leveraged credit funds may lose 25 per cent of their money because of the turmoil in credit markets.
Of the MSCI World Index's 10 industry groups, only financial stocks have declined this year on concern losses from U.S. subprime mortgages resulting in tighter credit conditions will hurt earnings.
Hong Kong's Hang Seng climbed 4 per cent to 25,554.64, posting its biggest gain since Aug. 20. Sun Hung Kai Properties, Hong Kong's No. 1 developer by market value, climbed 6.3 per cent to a record HK$123.20. Cheung Kong (Holdings) Ltd., the second biggest, added 7.2 per cent to HK$128.60.
The Hong Kong Monetary Authority cut its base rate for overnight lending to 6.25 per cent from 6.75 per cent. The city's de facto central bank, which has tied its currency to the U.S. dollar since 1983, forms its base rate by adding 1.5 per centage points to the Fed's overnight lending rate. Lower borrowing costs spur demand for mortgages and property.
``In a falling-interest-rate environment, there will inevitably at some point be a requirement'' for local banks to lower mortgage rates, said Tahnoon Pasha, who oversees $2.2 billion as head of Asian equities at Manulife Asset Management in Hong Kong. ``A declining rate environment benefits developers in terms of the demand outlook for their products.''
Japan's exporters also gained after the yen weakened, boosting the value of overseas sales when converted into local currency. The yen traded at 115.87 to the dollar at the 3 p.m. end of stocks trading in Tokyo, from 114.89 at yesterday's close. The Japanese currency dropped to 161.97 against the euro from 159.16.
Canon, the world's biggest digital-camera maker, added 3.5 per cent to 6,300 yen. Honda, Japan's No. 2 automaker, gained 3.5 per cent to 3,890 yen. The company's annual operating profit gains about 13 billion yen ($112 million) for every 1 yen that Japan's currency weakens against the dollar, according to Koji Endo, a senior analyst at Credit Suisse Group in Tokyo.
Oil producers climbed as crude prices in New York traded above $82 a barrel. PetroChina Co., China's largest oil company, jumped 3.1 per cent to HK$11.96 in Hong Kong. Inpex Holdings Inc., Japan's No. 1 oil explorer, rose 8.9 per cent to 1.22 million yen.
Gold miners rose on the precious metal's advance to a 16- month high. Newcrest Mining Ltd., Australia's biggest gold mining company, climbed 6.7 per cent to A$28.06. Zijin Mining Group Co., which runs China's largest gold mine, gained 6.9 per cent to HK$10.48.
Cosmo Oil Co., Japan's fourth-largest refiner, surged 6.3 per cent to 578 yen after it said it will sell a 20.85 per cent stake to Abu Dhabi's state-controlled International Petroleum Investment Co. for 89.2 billion yen. The Middle Eastern nation will become Cosmo's largest shareholder.