Asian stocks climbed, with the regional benchmark index posting its biggest first-half gain in three years, after European leaders meeting in Brussels agreed to ease repayment rules for Spanish banks and make it easier to recapitalize the region’s troubled lenders.
Westpac Banking Corp. (WBC) rose 1.5 percent in Sydney as banks provided the biggest support to the Asian benchmark after leaders of the 17 euro countries dropped a requirement that governments get preferred creditor status on crisis loans to Spain’s banks. Toyota Motor Corp. (7203) advanced 2.6 percent, leading gains among Japanese exporters. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 2.3 percent as metals prices soared.
The MSCI Asia Pacific Index (MXAP) climbed 2 percent to 117.24 as of 7:03 p.m. in Tokyo, with nine stocks rising for each that fell. The measure was headed for its biggest weekly advance since January, rising 2.7 percent. The gauge fell 12 percent through yesterday from a February high amid concern growth in China and the U.S. is slowing as Europe’s debt crisis escalates.
“It was a moment of high drama,” said Jonathan Garner, Hong Kong-based chief strategist at Morgan Stanley, of the European leaders’ decision. “France sided with Spain and Italy and all three of those countries made it very clear they weren’t pursuing with the long-term goals around fiscal union and or growth measures unless one dealt with the short-term problem of stability in the bond markets and the Spanish banks problem.”
The Asian benchmark rose 3 percent for the first six months, the biggest first-half gain since 2009. That compares with a 5.7 percent advance in 2012 by the Standard & Poor’s 500 Index and a 0.1 percent increase by the Stoxx Europe 600 Index through yesterday. Stocks in the Asian benchmark are valued at 12 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.3 times for the Stoxx 600.
Hong Kong’s Hang Seng Index gained 2.2 percent and Japan’s Nikkei 225 added 1.5 percent. China’s Shanghai Composite Index climbed 1.4 percent, South Korea’s Kospi increased 1.9 percent and Australia’s S&P/ASX 200 rose 1.2 percent.
Chancellor Angela Merkel said Germany’s philosophy that financial aid must carry conditions remains in place after European leaders eased repayment rules on emergency loans.
“Our formula hasn’t changed,” she told reporters as she arrived for day two of the summit in Brussels. “I think we have taken some important decisions, but we remain true to our philosophy of no help without something in return.”
“Europe keeps making bold statements, then diluting them shortly afterwards,” Mark Matthews, Singapore-based head of research Asia for Bank Julius Baer & Co., which manages $281 billion worldwide, said in an e-mail. “These are only vague encouraging words, which have produced excitement and euphoria. They will almost certainly be followed by denials and delays, and confusion in the marketplace.”
Financial shares accounted for the largest gains on the Asian regional benchmark. Westpac advanced 1.5 percent to A$21.13. Australia & New Zealand Banking Group Ltd. climbed 2.5 percent to A$22.03.
Nomura Holdings Inc. (8604) surged 3.9 percent to 294 yen. Japan’s largest brokerage will cut pay for Chief Executive Officer Kenichi Watanabe by 50 percent following the results of a probe into insider trading, it said in a statement after the close of markets in Tokyo.
Exporters climbed. Toyota Motor gained 2.6 percent to 3,190 yen. Hutchison Whampoa Ltd. (13), a port operator that gets about half its sales in the Europe, rose 2.3 percent to HK$66.50 in Hong Kong.
BHP Billiton rose 2.3 percent to A$31.45. Rio Tinto Group advanced 2.4 percent to A$56.50. Copper for delivery in three months advanced 2 percent on the London Metal Exchange.
David Jones Ltd., Australia’s second-largest department store operator, advanced 15 percent to A$2.59 after receiving a A$1.65 billion ($1.68 billion) offer from EB Private Equity, an entity the retailer said gave no explanation of its capacity to pay.
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