BLBG: Asian Stocks Advance as Fed Cuts Interest Rates to Record Low
By Shani Raja and Ian Sayson
Dec. 17 (Bloomberg) -- Asian stocks rose to a five-week high, led by developers, after the Federal Reserve cut interest rates to a record low and said it will use “all available tools” to stimulate the economy.
Sun Hung Kai Properties Ltd. surged 4.6 percent after Hong Kong also lowered borrowing costs. Mitsubishi Estate Co. rose 9.6 percent in Tokyo on speculation the nation’s central bank will reduce interest rates this week. Angang Steel Co. jumped 8.1 percent after China said it will boost reserves of raw materials. Honda Motor Co. slumped 5.4 percent in Japan, where shares retreated from earlier highs, on concern profits will shrink after the dollar fell to a 13-year low against the yen.
“This is a strong statement that the U.S. is doing all it can to support the market and prevent a sharp economic deterioration,” said Masahiko Ejiri, who manages Asian equities at Tokyo-based Mizuho Asset Management Co., which oversees $26 billion. “It’s also a sign that things are getting worse. There will be less room for them to maneuver from here.”
The MSCI Asia Pacific Index added 1.7 percent to 88.94 as of 1:42 p.m. in Tokyo. The measure has lost 43 percent this year, as the global credit crisis triggered by the collapse of the U.S. housing market pushed the world’s largest economies into recession.
Hong Kong’s Hang Seng Index gained 2.1 percent, led by a 5.2 percent advance in China Unicom (Hong Kong) Ltd. after the nation’s second-biggest mobile-phone carrier agreed to buy telecommunication assets from its parent.
Futures Drop
Japan’s Nikkei 225 Stock Average fell 0.2 percent to 8,551.11, reversing gains, as Honda led carmakers lower. Stocks also retreated after futures on the Standard & Poor’s 500 Index dropped 1 percent.
The S&P 500 Index rallied 5.1 percent yesterday, the most on a Fed rate-decision day since 1994, according to Bespoke Investment Group LLC. The Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 percent. A senior Fed official indicated that the bank will now shift its policy focus to asset purchases as a means of providing liquidity.
Sun Hung Kai, Hong Kong’s largest developer by market value, added 3.9 percent to HK$68.65. Henderson Land Development Co. climbed 5.1 percent to HK$32.20.
The Hong Kong Monetary Authority lowered its base rate to 0.5 percent from 1.5 percent. Movements in Hong Kong rates typically track U.S. credit policy because the city’s currency is pegged to the dollar.
In Japan, expectations the Bank of Japan will cut borrowing costs more than doubled after the government urged the central bank to do more to support the economy.
Mitsubishi Estate soared 9.3 percent to 1,440 yen. Mitsui Fudosan Co., the largest, added 5.8 percent to 1,365 yen, while Sumitomo Realty & Development Co., the third biggest, gained 4.3 percent to 1,309 yen.
Japan Central Bank
Investors see a 52 percent chance that the policy board will reduce the overnight call rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading, up from 20 percent yesterday morning. The meeting ends on Dec. 19.
Honda, which gets more than half its sales in North America, fell 5.4 percent to 1,866 yen after the Nikkei said the carmaker will cut its annual profit goal by 200 billion yen ($2.25 billion) from its October forecast. Honda’s vehicle sales in the U.S. plunged 32 percent in November, the most since 1981.
Nissan Motor Co., the nation’s third-biggest automaker, lost 5.4 percent to 298 yen. The company will cut local production by 78,000 vehicles from next month.
Dollar Slump
Recessions in the U.S., Europe and Japan are sapping demand for vehicles while the stronger yen shrinks repatriated profits for Japanese automakers.
The dollar fell today below 88.53 against the yen for the first time since August 1995 as the rate cut made the greenback the lowest-yielding currency among industrialized nations.
Newcrest Mining, Australia’s largest gold producer, climbed 3.2 percent to A$29.92. Gold futures for February delivery rose as high as $857.50 in electronic trading in New York.
“The dollar is going to the sewer, and this is highly bullish for gold,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.
Zijin Mining Group Co., China’s biggest gold producer, surged 7 percent to HK$4.59. Angang Steel, the nation’s second-largest steelmaker, surged 8.7 percent to HK$8.37. China Oilfield Services Ltd., a unit of the nation’s largest offshore oil producer, rallied 9 percent to HK$6.20.
The government’s plan to bolster its materials inventories is among several measures to help the steel, metal and petroleum industries, which have suffered from losses as prices plunged, the Ministry of Industry and Information Technology said yesterday. It didn’t specify the materials to be purchased.
China Unicom climbed 5.2 percent to HK$10.56 after agreeing to buy fixed-line assets for 6.43 billion yuan ($940 million) from its state-owned shareholders. The acquisitions are part of government plan to let carriers offer both wireless and landline services.
To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
