Asian stocks and U.S. futures rose on speculation the U.S. government will increase its stake in Citigroup Inc., reducing the risk that bank failures will deepen the global recession. Treasuries and the dollar fell. Hang Seng Bank Ltd., Hong Kong’s second-largest by assets, climbed 3.2 percent as the Wall Street Journal said Citigroup had proposed the U.S. convert a large portion of its preferred shares into common stock in a transaction that wouldn’t cost taxpayers more money. South Korea’s Samsung Electronics Co. rose 3.7 percent and China’s Poly Real Estate Group Co. jumped 6.5 percent as the two countries moved to widen stimulus measures. “It’s a temporary boost of confidence,” said Nicole Sze, a Singapore-based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “These mega banks will not be allowed to fail. The market is insisting that no matter what happens, the government will step in to prop them up.” The MSCI Asia Pacific Index gained 1 percent to 76.75 at 3:15 p.m. in Tokyo, having earlier fallen 1.1 percent. The gauge lost 14 percent this year as the worsening economic slowdown hurt corporate profits. Most key Asian indexes rose, led by South Korea’s Kospi Index, which climbed 3.2 percent. Japan’s Nikkei 225 Stock Average lost 0.5 percent to 7,376.16 as the bankruptcy of lender SFCG Corp. stoked concern more companies will fail. Toshiba Corp., Japan’s biggest chipmaker, slumped 6.5 percent after the Yomiuri newspaper reported the company is considering raising funds to strengthen its finances. BlueScope, Australia’s largest steelmaker, tumbled 11 percent in Sydney after saying it may have a loss this half. Government Control? Futures on the U.S. Standard & Poor’s 500 Index rallied 1.3 percent today following the Citigroup report. The gauge dropped 1.1 percent on Feb. 20. Citigroup tumbled 22 percent as Senator Christopher Dodd, chairman of the Banking Committee, said it may be necessary to nationalize some banks for “a short time.” The company’s Tokyo-listed shares dropped 3.8 percent to 230 yen. The dollar dropped to $1.2913 per euro from $1.2826 late last week in New York. It declined to 92.99 yen from 93.35. Governments have been stepping up measures to revive banking systems burdened with more than $1 trillion of writedowns and losses tied to U.S. credit investments. Bank of America Corp. and Citigroup have received a combined $90 billion in U.S. aid in four months. The MSCI Asia Pacific’s finance gauge is the worst performer of the broader index’s 10 industry measures this year as losses from the financial crisis swelled. The International Monetary Fund said last month bank losses worldwide from toxic U.S.-originated assets may reach $2.2 trillion. Treasuries Decline Hang Seng Bank jumped to HK$84.60. HSBC Holdings Plc, which controls Hang Seng Bank and owns a U.S. mortgage business, added 0.8 percent to HK$55.25. KB Financial Group Inc., which controls South Korea’s largest lender, rose 4 percent to 28,450 won. Samsung Electronics, the world’s largest memory-chip maker, rose 3.5 percent to 485,000 won. South Korea is prepared to support its currency and add to a bank recapitalization fund should the economic slump worsen, Finance Minister Yoon Jeung Hyun said. Yield on 10-year Treasuries increased one basis point to 2.81 percent, according to BGCantor Market Data, amid reduced demand for safe-haven assets. The price of the 2.75 percent security due in February 2019 fell 3/32, or $0.94 per $1,000 face amount, to 99 1/2. A basis point is 0.01 percentage point. “It’s an unwinding of the flight to quality,” said Kazuaki Oh’e, a Tokyo-based debt salesman at Canadian Imperial Bank of Commerce, Canada’s fifth-biggest bank. Treasuries may give up gains from Feb. 20, when the 10-year notes rose 14/32, he said. Investment Losses Poly Real Estate jumped 6.5 percent to 20.10 yuan after the China Securities Journal said a stimulus plan for the industry has been submitted to the top economic planning agency for review. Shenzhen exchanges, added 1.6 percent to. China Vanke Co., the nation’s largest developer by market value, rose 5.2 percent to 8.14 yuan. Japan’s Norinchukin Bank, which isn’t publicly traded, said on Feb. 20 that it will raise 1.9 trillion yen ($20.2 billion) in new funds as it declared $10 billion of losses on asset- backed securities, the most by any Asian lender. That announcement helped drag the Nikkei down by as much as 2.8 percent earlier today, though the average pared its declines after the Citigroup report. ‘Difficult To Justify’ “It’s difficult to justify the enthusiasm for the plan, given that it indicates the actions taken to date have been inadequate in arresting the decline of the financial system,” said Tim Schroeder, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “We’re dealing with deteriorating profitability and balance sheets.” Orix Corp., which provides corporate loans and develops real estate, plummeted 13 percent to 2,060 yen as SFCG, a Tokyo- based lender to small companies, filed today for protection from creditors with 338 billion yen in liabilities. It was Japan’s biggest bankruptcy in more than a year. Toshiba slumped 6.5 percent to 215 yen following the Yomiuri’s Feb. 20 report that the company is considering raising more than 300 billion yen. BlueScope tumbled 11 percent to A$2.78 as the global slowdown forced steelmakers to cut output, prompting the company to say today that it may have a second- half loss.

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