Asian Stocks Climb on Commodities Rally, China Consumer Prices

Asian stocks rose, sending the MSCI Asia Pacific Index to its steepest gain in a month, as commodity prices climbed and consumer prices fell in China, making it easier for the government to maintain low interest rates.

Fortescue Metals Group Ltd., Australia¡¯s third-largest iron ore producer, soared 15 percent, while Mitsubishi Corp., a trading company that gets more than half its profit from commodities, climbed 6.3 percent in Tokyo. Bank of China Ltd., the nation¡¯s third-largest by market value, rallied 8.3 percent in Hong Kong on speculation loan demand will pick up. David Jones Ltd., Australia¡¯s No. 2 department store chain, surged 5.6 percent as a consumer confidence index surged.

¡°Investors are focusing more on the possibility that the economy is emerging from its worst period,¡± said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $7.7 billion. ¡°Improved sentiment is resulting in this resilient market.¡±

The MSCI Asia Pacific Index gained 2.7 percent to 104.86 as of 5:56 p.m. in Tokyo, the biggest climb since May 7. The gauge has surged 49 percent from a five-year low on March 9 as equities from Mumbai to Shanghai rallied on rising confidence the worst of the global recession is over.

Japan¡¯s Nikkei 225 Stock Average rose 2.1 percent to an eight-month high as Mitsui O.S.K. Lines Ltd., the country¡¯s second-biggest bulk shipper, surged 5.5 percent on brokerage recommendations. In Taipei, Taiwan Semiconductor Manufacturing Co. climbed 3.7 percent after saying the worst is over for the global chip industry.

Higher Valuations

South Korea¡¯s retailers rallied after Shinsegae Co. reported higher sales. Hong Kong¡¯s Hang Seng Index rallied 4 percent and China¡¯s CSI 300 Index rose 1 percent, with gains accelerating after the consumer prices report. Vietnam and Pakistan were the only stock markets that fell in Asia today.

Futures on the Standard & Poor¡¯s 500 Index rose 1.1 percent. Most U.S. stocks rose yesterday, lifting the S&P 500 up by 0.4 percent as a better-than-estimated forecast at Texas Instruments Inc. spurred gains in technology companies.

The three-month stock rally has driven the average valuations of companies on the MSCI Asia Pacific Index to 1.5 times the book value of assets, the highest since Sept. 26. Analyst profit forecasts have been increasing since the end of March, according to data compiled by Bloomberg.

Fortescue soared 15 percent to A$3.59 in Sydney, the steepest rally since May 11. Mitsubishi Corp. added 6.3 percent to 1,995 yen. Aluminum Corp. of China Ltd., the nation¡¯s biggest maker of the lightweight metal, advanced 8.8 percent to HK$8.44.

Best Performers

Crude oil in New York gained 2 percent in after-hours trading. It rose 2.8 percent to $70.01 a barrel yesterday, the highest settlement since Nov. 4. A gauge of six metals jumped 3.8 percent in London, the most since June 1. Copper surged 5 percent in New York.

Measures of energy and material stocks have been the top performers among the MSCI Asia Pacific Index¡¯s 10 industry groups in the past month on speculation demand for commodities will increase as global growth picks up.

Bank of China rose 8.3 percent to HK$3.79. Industrial & Commercial Bank of China Ltd., the country¡¯s largest lender, rose 5.9 percent to HK$5.03. China Mobile Ltd., the world¡¯s biggest wireless carrier by users, added 4.5 percent to HK$82.95.

¡°The consumer prices report shows that there¡¯s not much pressure on inflation, so there¡¯s no need for interest rates to increase,¡± said Kenny Tang, executive director of Redford Securities Co. ¡°Chinese banks are rallying because low interest rates will stimulate new loan growth.¡±

Low Borrowing Costs

Consumer prices dropped 1.4 percent in May from a year earlier, China¡¯s statistics bureau said today, more than the 1.3 percent drop expected by economists in a Bloomberg News survey.

The People¡¯s Bank of China has boosted credit this year by scrapping restrictions on growth in new loans and keeping the one-year lending rate at a four-year low of 5.31 percent.

Signs of a global recovery have increased in recent weeks, fueling the stock rally since March. Australia unexpectedly reported growth in its economy last week, while Japan¡¯s government two weeks ago raised its view of the economy for the first time in three years.

The Organization for Economic Cooperation and Development plans to upgrade its assessment of the global economy this month for the first time in two years, the Japan¡¯s Nikkei newspaper said today, without saying where it got the information.

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