By Patrick Rial and Shani Raja Dec. 18 (Bloomberg) -- Asian stocks rose, led by financial companies, on optimism declining borrowing costs will bolster margins and reduce bad loans. Energy producers slumped as oil traded near its lowest level in more than four years. Sumitomo Mitsui Financial Group Inc., Japan’s third-largest bank, and Mitsui Fudosan Co., the nation’s biggest developer, gained more than 6 percent in Tokyo on speculation the Bank of Japan will lower interest rates tomorrow. Woodside Petroleum Ltd. slumped 6.1 percent in Sydney after crude fell below $40 a barrel. Honda Motor Co. sank 3.4 percent after cutting its earnings forecast by almost two-thirds on lower sales. “Falling interest rates are helping,” Hans Kunnen, head of investment market research at Colonial First State Global Management, which manages $86 billion. “Anything that helps get us back onto a growth path or ease the pain of the slowdown will be good for stocks.” The MSCI Asia Pacific Index rose 0.6 percent to 90.80 as of 2:50 p.m. in Tokyo, set for its highest close since Nov. 5. Five stocks gained for every four that fell on the 953-member index, while most industry groups declined. The gauge has rallied 20 percent since reaching a five-year low on Nov. 20 as governments from China to the U.S. took steps to protect their economies from the worst financial crisis since the Great Depression. The index is still headed for a record 43 percent annual drop, pushing shares to an average price of 12.9 times estimated earnings, almost a quarter less than at the start of the year. Australia’s S&P/ASX 200 Index added 0.3 percent, led by an 8 percent advance in Qantas Airways Ltd. on speculation lower oil will cut fuel costs. Rate Cuts Hong Kong’s Hang Seng Index fell 0.9 percent, led by Cnooc. Ltd, after the city’s central bank said losses on the local stock and property markets may worsen next year. Japan’s Nikkei 225 Stock Average was added 0.6 percent to 8,661.64. Futures on the Standard & Poor’s 500 Index rose 0.1 percent. Both Australia and Hong Kong have cut interest rates this month to stimulate growth after their economies entered recessions. China’s central bank Governor Zhou Xiaochuan stoked speculation that an interest-rate cut is imminent, reiterating that falling inflation has added pressure for a reduction. Investors see a 58 percent chance that the Bank of Japan’s 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 on Dec. 16. The meeting ends tomorrow. Sumitomo Mitsui, which last week said it plans to sell 538.2 billion yen ($5.8 billion) of preferred securities to bolster its finances, advanced 7.1 percent to 379,000 yen. Mitsui Fudosan rose 6 percent to 1,422 yen. Global Writedowns Financial companies have disclosed more than $1 trillion of writedowns and credit losses since the collapse of the U.S. subprime mortgage market last year, forcing banks to rein in lending. A lack of access to funds caused the failure of more than 20 listed Japanese developers in 2008. Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, rose 4.6 percent to 542 yen. The lender is likely to see increased loan volumes, Nana Otsuki, an analyst at UBS said. Otsuki upgraded the stock to “buy” from “neutral.” Woodside Petroleum Ltd., Australia’s second-biggest oil producer, lost 5.8 percent to A$33.93. Cnooc, China’s largest offshore oil producer, dropped 5.9 percent to HK$7.53. Crude oil futures tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, and fell as low as $39.19 today. Prices have plunged 73 percent from a record on July 11. Airlines Surge Qantas rose 8 percent to A$2.44, as the declining oil price reduces the cost of jet fuel for airlines. Singapore Airlines Ltd., Southeast Asia’s largest carrier, added 3.2 percent to S$11.48, the fourth-biggest contributor to gains on the Straits Times Index. Honda, Japan’s second-largest automaker, slid 3.4 percent to 1,827 yen. The company slashed its net income forecast for the year ending in March by 62 percent and chopped its third-quarter dividend in half, as the stronger yen crimped profits. Koichi Sugimoto, an analyst at Merrill Lynch & Co. in Tokyo, cut his recommendation to “underperform” from “neutral.” Vehicle sales in Japan may fall to the lowest in 31 years in 2009, the Japan Automobile Manufacturers Association said today, as unemployment and the economic slowdown keep drivers away. “You will inevitably see markets retrace some of the gains they made in this sort of rally over the past month,” said Tim Rocks, an Asian equities strategist at Macquarie Group Ltd. “In the first quarter of next year, we see the main concern as being the reporting season. The speed with which the global economy has deteriorated, there just simply must have been a lot of damage done.” Production Halted Auto-parts makers dropped as carmakers slashed production. Aisin Seiki Co., the world’s biggest maker of automatic transmissions, tumbled 6 percent to 1,148 yen. JTEKT Corp., which makes power steering, lost 3 percent to 619 yen. Chrysler LLC said yesterday it will shut all of its plants for at least a month as unsold cars and trucks pile up at showrooms. Chrysler and General Motors Corp. have restarted merger negotiations as the U.S. Treasury and White House mull a bailout package for the industry, the Wall Street Journal reported today. Commonwealth Bank of Australia slumped by a record 9.7 percent to A$26.32 as the nation’s biggest mortgage lender sold stock at a steeper discount than planned. Shin-Etsu Chemical Co. fell 9 percent to 3,760 yen after the Japanese maker of silicon wafers said profit may miss its forecast, citing weak demand for electronic materials and the stronger yen. Alco Holdings Ltd., a supplier of consumer electronics for customers including Wal-Mart Stores Inc., rallied 17 percent to HK$1.42. Activist investor David Webb named the stock his “Christmas Pick” for this year on prospects the company will gain market share as consumers switch to lower-priced products. To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

Source