Asian Stocks Rebound After Rate Cut; Banks, Miners Lead Gains

Jan. 23 (Blomberg) -- Asian stocks rebounded from the biggest two-day drop in 18 years, led by banks and mining companies, after the U.S. Federal Reserve cut interest rates to ward off a recession.

HSBC Holdings Plc and Mitsubishi UFJ Financial Group Inc. gained after the Fed cut its benchmark rate to 3.5 percent in its first emergency reduction since 2001. BHP Billiton Ltd., the world's largest mining company, jumped the most in 20 years following a rally in prices of copper and gold. Sun Hung Kai Properties Ltd. climbed in Hong Kong as the city followed the Fed in lowering borrowing costs, supporting demand for real estate.

``The Fed's move will obviously help the global economy and the problems we're seeing right now will work themselves out eventually,'' said Peter Chiang, who helps manage $16 billion as chief equity strategist at DBS Asset Management in Singapore. ``There's still some concern on the impact of a U.S. slowdown.''

The MSCI Asia Pacific Index added 2.8 percent to 135.72 as of 3:06 p.m. in Tokyo, on course for its biggest gain since Sept. 19. The index dropped 10 percent in the past two days, the steepest decline since April 1990.

Japan's Nikkei 225 Stock Average added 2 percent to 12,829.06. Hong Kong's Hang Seng Index surged 5.3 percent, Asia's biggest advance. Infosys Technologies Ltd. paced gains in India, where the Sensitive index climbed for the first time in eight days. The rebound in most Asian markets today helped trim the MSCI regional benchmark's 2008 loss to 15 percent.

In the U.S., the Standard & Poor's 500 Index fell 1.1 percent yesterday, taking its decline this year to 11 percent. S&P 500 futures expiring in March slipped 1.2 percent in Asian trading today.

Increasing Risks

``It will take a while for the rate cut to work,'' said Marvin Fausto, Manila-based chief investment officer at BDO Unibank Inc., which has about $3.7 billion in assets under management. ``Until economic data show the U.S. is out of a recession, sharp gains in equities will not be sustained.''

HSBC, Europe's biggest bank, surged 7.6 percent to HK$112.30 in Hong Kong, snapping a three-day, 13 percent decline. Mitsubishi UFJ, Japan's largest bank by market value, rose 3.9 percent to 897 yen, after losing 12 percent in the past two trading sessions.

The Fed cited a ``weakening'' economic outlook and ``increasing downside risks to growth.'' The cut of three- quarters of a percentage point was the biggest single reduction since the central bank began using the rate as the principal tool of monetary policy around 1990. Policy makers weren't scheduled to meet to discuss rates until Jan. 29-30.

Bank of China, BHP Gains

Bank of China Ltd. gained 3.9 percent to HK$3.20 in Hong Kong after saying profit last year rose. The South China Morning Post newspaper had reported that the bank may post a loss due to investments in subprime mortgages.

BHP jumped 9.3 percent to A$33.89 after second-quarter iron ore output rose 9 percent to a record on demand from China. The stock's gain was its biggest since December 1987, and snapped a five-day, 20 percent loss.

Rio Tinto Group, the world's third-largest mining company, surged 5 percent to A$106.01, after yesterday tumbling by the most since December 1987. Nippon Mining Holdings Inc., Japan's biggest copper producer, rose 5.4 percent to 584 yen.

A measure of six metals traded on the London Metal Exchange, including copper and nickel, gained 1.7 percent yesterday. Copper rose 2.2 percent and zinc jumped 3.6 percent. Gold also recently advanced 1 percent to $890.30 an ounce in after-hours trading in New York.

Hong Kong Developers

Shares of Sun Hung Kai, Hong Kong's biggest developer by market value, rallied 4.9 percent to HK$148.70. Cheung Kong (Holdings) Ltd., the second-largest, added 5 percent to HK$123.70. Hang Lung Properties Ltd. jumped 7.8 percent to HK$28.95.

The Hong Kong Monetary Authority cut its base rate for overnight lending to 5 percent from 5.75 percent. The city's monetary policy tracks the Fed's because its currency is pegged to the U.S. dollar. HKMA Chief Executive Joseph Yam said the U.S. rate reduction will ``help ease panic emotions in markets.''

Infosys, India's second-biggest computer-services provider, rose 1.8 percent to 1,402.7 rupees, halting a 10-day, 17 percent retreat. JPMorgan Chase & Co. raised its rating on Infosys and rivals Wipro Ltd. and HCL Technologies to ``overweight'' from ``neutral,'' citing the stocks' recent tumbles.

Declines this year have made Asian stocks cheaper. India's Sensitive Index, which has lost 15 percent this year, is valued at about 23 times earnings, compared with a peak of 31 times a week earlier. China's CSI 300 Index has dropped to a multiple of 44 from a high of 53 in October, following the benchmark's 8.2 percent slide in 2008.

Jiangxi Copper Co., China's second-biggest producer of the metal, tumbled 29 percent to HK$14.62 in Hong Kong, the biggest decline on the MSCI regional index.

The company had halted trading of its shares for the past week to announce a plan to sell 6.8 billion yuan ($940 million) of bonds with warrants to fund acquisitions and to repay debt.

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