Bloomberg News

Asian Stocks Advance for Second Day as China Cuts Reserve Ratio

February 20, 2012

Feb. 20 (Bloomberg) -- Asian stocks rose, extending the benchmark gauge’s longest streak of weekly gains since 2005, after China cut reserve requirements for banks to fuel lending and buoy economic growth, boosting demand for riskier assets.

Franshion Properties China Ltd., a developer that gets all of its revenue from the mainland, rose 7.4 percent in Hong Kong. China Shipping Container Lines Co., the country’s second-largest carrier of sea-cargo boxes, jumped 7.3 percent. Japanese steelmakers advanced after Credit Suisse Group AG boosted their share-price estimates. Billabong International Ltd., an Australian surfwear company, jumped 8 percent in Sydney, extending its surge on Feb. 17, after saying it is considering a revised takeover offer.

China’s reserve-ratio cut “is a bold move and one aimed at maintaining growth rates, which will provide support for equity investors, particularly those who want to take a bit more risk in the current environment,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The timing is probably just ahead of China committing to European bailout funds.”

The MSCI Asia Pacific Index climbed 0.8 percent to 128.01 as of 1:38 p.m. in Tokyo, about 0.7 percent short of entering a so-called bull market from its Oct. 5 low. Japan’s Nikkei 225 Stock Average gained 0.9 percent even after a report showed the country’s exports fell last month. Australia’s S&P/ASX 200 Index increased 1.2 percent, while South Korea’s Kospi Index rose 0.3 percent.

Hong Kong’s Hang Seng Index gained 0.7 percent, while China’s Shanghai Composite Index advanced 0.9 percent. Singapore’s Straits Times Index rose 0.4 percent.

Reserves Cut

The proportion of cash that Chinese lenders must set aside will drop half a percentage point from Feb. 24, the central bank said Feb. 18 on its website. A 50 basis-point cut may add 400 billion yuan ($64 billion) to the financial system, according to Australia & New Zealand Banking Group Ltd. The previous reduction was the first since 2008.

Franshion Properties jumped 7.4 percent to HK$2.03 in Hong Kong, the second-steepest gain in the MSCI Asia Pacific Index. Komatsu Ltd., a construction machinery maker that gets more than a fifth of its revenue from China, rose 2.6 percent to 2,412 yen in Tokyo.

The MSCI Asia Pacific Index gained 12 percent this year through last week, compared with an 8.2 percent advance by the S&P 500 and an 8.8 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 14.6 times estimated earnings on average at the last close, compared with 13.1 times for the S&P 500 and 11 times for the Stoxx 600.

Shipping Stocks

Container shipping stocks rose after Maersk Line, the world’s largest container carrier, said it will cut 9 percent of its shipping capacity between Asia and Europe. The cut is positive news for the loss-making liner industry, and provides credibility to proposed rate increases on the Asia-Europe trade lane, Citigroup Inc. said.

China Shipping Container jumped 7.3 percent to HK$2.49 in Hong Kong, while Taiwan’s Evergreen Marine Corp. climbed 4.3 percent to NT$19.25 in Taipei.

Futures on the Standard & Poor’s 500 Index rose 0.5 percent today as Prime Minister Lucas Papademos said Greece has found all the extra budget cuts needed to secure a debt bailout. The index added 0.2 percent in New York on Feb. 17.

Japanese Finance Minister Jun Azumi said his nation and China will work together to help Europe solve its debt crisis through the International Monetary Fund. Europe needs more funding to contain the crisis, even as Greece shows some improvement in curing its financial woes, Azumi told reporters in Beijing yesterday after meeting Chinese Vice Premier Wang Qishan.

Steelmakers Rise

Japanese steelmakers rose after Credit Suisse raised their stock-price estimates and maintained their “outperform” ratings. The investment bank expects export prices to recover and input prices to fall.

JFE Holdings Inc. Japan’s second-largest steelmaker, rose 7.1 percent to HK$1,692 yen and Nippon Steel Corp. advanced 4.7 percent to 223 yen. Kobe Steel Ltd. climbed 4.4 percent to 141 yen even after its target price was cut by Credit Suisse to 120 yen from 125 yen.

Billabong increased 8 percent to A$2.83 in Sydney after saying it will consider a A$3 per share takeover proposal from buyout firm TPG Capital after the bid was revised to allow for an asset sale. The shares surged 46 percent on Feb. 17.

Among stocks that fell, Universal Entertainment Corp., a maker of pachinko slot machines, slumped 21 percent to 1,516 yen in Tokyo after Wynn Resorts Ltd. redeemed Universal’s 20 percent stake at a 31 percent discount and accused Chairman Kazuo Okada of improper payments.

--Editor: John McCluskey

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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


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