Oct. 6 (Bloomberg) -- Asian stocks gained for a third week and reached a record after former U.S. Federal Reserve Chairman Alan Greenspan and Citigroup Inc. suggested that losses in credit markets will abate.

Mizuho Financial Group Inc. and National Australia Bank Ltd. led a rally by financial shares after Greenspan said lenders are displaying a willingness to take on greater risk and Citigroup forecast earnings will improve this quarter.

Nikko Cordial Corp., Japan's third-biggest brokerage, surged after Citigroup Inc. said it will buy the remaining shares it doesn't own in the company. Cathay Financial Holding Co. gained after agreeing to take over China United Trust & Investment Corp.

``The concerns people had before about the credit squeeze hitting the financial sector now look exaggerated,'' said Kim Han Jin, vice president of Fides Investment Management in Seoul, which manages the equivalent of $990 million in equities. ``Stocks are rising on liquidity and the fading concerns.''

The Morgan Stanley Capital International Asia-Pacific Index added 1.7 percent to 166.06 after reaching a record on Oct. 3, extending a two-week, 7.1 percent rally. Financial shares were the biggest gainers among the measure's 10 industry groups, jumping 4.2 percent.

Japan's Nikkei 225 Stock Average added 1.7 percent this week. Shares also rose as the Bank of Japan's quarterly Tankan report showed business confidence held near a two-year high. Hong Kong's Hang Seng Index rose to a record on Oct. 2 before posting its biggest two-day loss in seven weeks on concern the recent surge had overvalued the prospects for company earnings. The measure ended the week 2.5 percent higher.

All others regional markets advanced, with benchmarks in Australia, South Korea, Singapore, Indonesia and India climbing to new highs.

Credit Woes Easing

``It's pretty natural for the market to rally to where it was before the credit crisis once concern over the problem is wiped out,'' said Yoshinori Nagano, who helps oversee about $70 billion at Daiwa Asset Management Co. in Tokyo.

Mizuho, Japan's second-largest publicly traded lender, added 8.4 percent to 710,000 yen this week, while National Australia, the nation's biggest bank, gained 2.6 percent to A$40.76. HSBC Holdings Plc, which was among the first to disclose soured U.S. home loans seven months ago, climbed 6.3 percent to HK$961.5.

``Lenders in recent days have been reaching out for longer- term, lesser quality assets, and that is a good sign,'' Greenspan said in a speech in London on Oct. 1. ``We're creeping closer to normality.''

Financial Sector Takeovers

The same day, Citigroup, the biggest U.S. bank, reported a 60 percent decline in third-quarter profit because of $5.9 billion of credit and trading losses on loans and mortgage- backed securities. Chief Executive Charles Prince said the bank expects to return to ``a normal earnings environment'' this quarter.

Saudi Prince Alwaleed bin Talal, a billionaire investor whose holding company owns 3.6 percent of Citigroup, said in an e-mailed statement on Oct. 2 that the third-quarter profit drop was a ``mere hiccup'' and that he backs the bank's management.

Mitsubishi UFJ Financial Group Inc., the biggest publicly traded bank in Japan, surged 18 percent to 1,187 yen this week, resuming trading after a one-week suspension. The lender implemented a one for 1,000 share split and set its minimum trading lot at 100 shares, making the stock more affordable for investors.

Nikko Cordial jumped 16 percent to 1,672 yen. Citigroup Japan Holdings Ltd. will use stock to acquire the remaining 32 percent of Nikko Cordial for about 1,700 yen a share, Citigroup Japan's Chief Executive Officer Douglas Peterson said on Oct. 2. The additional shares will cost the biggest U.S. bank 530 billion yen ($4.6 billion).

`Buying Opportunity'

Cathay Financial, Taiwan's No. 1 financial group, climbed 6.7 percent to N$82.40. Central Deposit Insurance Corp., the Taiwan government's bad-debt agency, agreed to pay Cathay United Bank, the company's banking unit, NT$12.9 billion ($396 million) to take control of the financial services company, Johnson Chen, the agency's president, said on Oct. 2.

``Recent financial market turmoil has created a buying opportunity for companies looking to expand through mergers,'' said Vickie Hsieh, who helps oversee $1.4 billion at President Investment Trust Corp. in Taipei. ``Investors should take these deals as a cue and look for investment opportunities.''

Westpac Banking Corp. added 1.9 percent to A$29.03. The fourth-largest Australian lender will buy Sydney-based Rams Home Loans Group's franchise network for A$140 million ($125 million) and provide A$1.5 billion in funding.

Sony Corp., the maker of the PlayStation game console and the Vaio computer, added 4 percent to 5,790 yen. The Bank of Japan's Tankan index of manufacturer sentiment stayed at 23 points in September from June, better than the two-point drop predicted by economists surveyed by Bloomberg News. A reading of 25 in the fourth quarter of last year was the highest since the third quarter of 2004.

Tankan's Boost

Japan's biggest companies said they plan to increase spending 8.7 percent in the year ending March, faster than June's projection of 7.7 percent. They also increased their profit and sales estimates for the period.

``The Tankan showed there's no bad evidence for the economy,'' said Masayuki Kubota, who oversees $2.1 billion in assets at Daiwa SB Investments Ltd. in Tokyo.

Fanuc Ltd., a maker of industrial robots, jumped 4.2 percent to 12,200 yen. Tokyo Electron Ltd., the world's second- largest supplier of chip-making equipment, added 5.1 percent to 7,650 yen.

`At A High'

Hong Kong's Hang Seng Index lost 4.3 percent in the two sessions ended Oct. 4, the most since a similar period ended Aug. 17. The benchmark closed at a record 28,199.75 on Oct. 2, soaring 38 percent since the start of trading on Aug. 20, when China said it will allow some citizens to invest directly in Hong Kong's stocks.

The 14-day relative strength index, a moving average based on gains and declines, for the Hang Seng rose to 84 on Oct. 2, above the 70-level some investors use as a signal to sell.

Sung Hung Kai Properties Ltd., the city's largest developer, was unchanged at HK$131 this week amid speculation it will sell shares in itself.

``The rumor is there will be a placement,'' Andrew Sullivan, head of Asian sales trading at Daiwa Securities SMBC Co. in Hong Kong said. ``I've been saying that for a couple of weeks because the stock's been at a high.''

The measure recouped some of its losses after Lee Shau-kee, Henderson Land Development Co.'s billionaire chairman, predicted that Hong Kong's stock market won't crash and said the Hang Seng may reach 30,000 by the Lunar New Year in February, according to a report in The Standard newspaper. Lee previously forecast that the benchmark would rise to 28,000 by year-end.

Industrial & Commercial Bank of China Ltd., the world's largest bank by market value, advanced 9.9 percent to HK$5.99 in Hong Kong.

Casio Computer Co., the Japanese maker of G-Shock watches and Exilim mobile phones, plunged 23 percent to 1,272 yen, the worst performer on the MSCI Asian index this week. The company lowered its net income projection on Oct. 4 by 39 percent to 17 billion yen for the year ending March 31, citing competition in the handset market and falling prices of liquid-crystal displays.

To contact the reporter on this story: Chen Shiyin in Tokyo at schen37@bloomberg.net;

Last Updated: October 5, 2007 19:40 EDT