Dec. 20 (Bloomberg) -- Asian shares rallied from the biggest drop in a month after Thailand scrapped penalties on stock investments. Toyota Motor Corp. and NEC Corp. gained after the yen fell, boosting the value of Japanese exports.

``Fundamentally the rest of Asia is still in good shape so we'll see money coming back into the other emerging markets after the Thai debacle yesterday,'' said Tom Murphy, who manages about $1 billion in Asian assets at Deutsche Bank AG in Sydney. ``The big economies like Japan won't be affected so their export stocks'' will drive the market.

The Morgan Stanley Capital International Asia-Pacific Index rose 1.3 percent to 138.84 as of 7.11 p.m. in Tokyo, after falling yesterday by the most since Nov. 20. Japan's Nikkei 225 Stock Average gained 1.4 percent to its highest since May 9. Markets rose across Asia, except in the Philippines and India. Benchmarks in New Zealand, Australia and China reached records.

PTT Pcl and Advanced Info Service Pcl led Thailand's SET Index to an 11 percent gain, rebounding from a 15 percent slump yesterday, its worst in 16 years. It spurred recoveries in emerging-market stocks after the Thai government abandoned rules imposed on Dec. 18 to lock up 30 percent of foreign-currency deposits for a year on funds earmarked for equities.

PTT, Thailand's biggest energy company, jumped 16 percent to 216 baht after plummeting 17 percent yesterday. Advanced Info, its largest mobile-phone operator, jumped 16 percent to 77 baht, recovering from a 21 percent drop. Bangkok Bank Pcl, the largest lender, added 7.8 percent to 111 baht. The stock slumped 16 percent yesterday.

`Buying Opportunities'

``The recent capital-control measures have raised the risk premium in Thai equities and may have negative consequences on foreign-investor confidence in the longer term,'' said Lim Chi Teong, who helps manage $7 billion in assets at DBS Asset Management in Singapore. ``This may result in the Thai equity market underperforming against other Asian markets, despite its low valuations.''

The Morgan Stanley Capital International Emerging Markets Index, which tracks 25 developing countries, fell 1.6 percent from a record yesterday. It gained 1.1 percent today after Thai Finance Minister Pridiyathorn Devakula said late yesterday the central bank would exempt stocks purchases from the day-old rule that required banks to lock up 30 percent of new foreign-currency deposits for a year.

The rules were imposed after the baht appreciated 16 percent in 2006 to a nine-year high against the dollar, threatening exports and economic growth. The 30 percent requirement stays in place for other investments, including bonds and property.

The exemption to stocks ``will stabilize the market and it will rally a bit, but it won't move back to where it was two days ago,'' said Donald Gimbel, who helps manage $2 billion in global equities at Carret & Co. in New York.

Weaker Yen

Toyota, the world's second-largest automaker, advanced 1.3 percent to 7,550 yen. NEC, Japan's largest maker of personal computers, jumped 2.9 percent to 575 yen. Honda Motor Co., Japan's No. 3 automaker, climbed 2.3 percent to 4,420 yen.

The yen traded at a record low against the euro, falling to 156.30 yen per euro from yesterday's close at 155.86. The yen was recently at 118.07 per dollar.

A weaker yen means Japanese exporters get more for their overseas sales when converted back to local currency while their products become more competitive.

Toyota made almost half its sales in North America and Europe last business year. Honda had 55 percent of its sales in North America, the highest of Japan's three biggest automakers.

Japan's currency has lost 11 percent against the euro this year as investors bet the European Central Bank will raise rates at a faster pace than the Bank of Japan.

Emerging Markets

The Kuala Lumpur Composite Index added 1.5 percent, rebounding from a 2 percent slump yesterday, its biggest one-day decline in seven months. Tenaga Nasional Bhd., its largest power producer, jumped 4.6 percent to 11.30 ringgit. The shares had tumbled 3.6 percent.

Indonesia's Jakarta Composite Index rose 1.7 percent after losing 2.9 percent yesterday. PT Bumi Resources, Indonesia's biggest coal exporter, rose 4.8 percent to 870 rupiah. It slumped 5.7 percent yesterday. PT Telekomunikasi Indonesia, the nation's biggest telephone company, added 1 percent to 9,950 rupiah, following a 1.5 percent decline.

Malaysia's Second Finance Minister Nor Mohamed Yakcop reassured investors the government had no plans to implement Thai-style capital restrictions to control its currency. Bank Indonesia's Governor Burhanuddin Abdullah said Thailand's impact on Indonesian stocks and the rupiah is ``temporary,'' and that the country will keep its floating exchange-rate policy.

U.S. Homes Data

Exporters gained as U.S. builders broke ground on new homes at an annual rate of 1.58 million last month, 6.7 percent higher than in October, the Commerce Department said yesterday. Economists in a Bloomberg News survey forecast a rise to 1.54 million units.

Samsung Electronics Co., South Korea's biggest exporter, added 1 percent to 616,000 won. LG Electronics Inc., the second largest, rose 2 percent to 56,500 won. Taiwan's AU Optronics Corp., the world's third-largest maker of liquid-crystal displays, advanced 1.9 percent to NT$44.70. Venture Corp., Singapore's biggest maker of customized electronics including Hewlett-Packard Co. printers, advanced 1.5 percent to S$13.80.

`Wealth Effect'

``The housing market creates a wealth effect that helps spending, which accounts for a big part of the U.S. economy,'' said Seo Jung Ho, who manages about $500 million at Daehan Investment Trust Management Co. in Seoul. ``Investors' confidence in that economy is improving, which benefits exporters.''

New Zealand's NZX 50 Index closed above 4000 for the first time at a record 4004.96, heading for its best year since 2004.

Fletcher Building Ltd., the nation's biggest construction company, gained 0.1 percent to NZ$10.79. Cemex SA, the world's third-largest cement maker, in October offered to buy Australia's Rinker Group Ltd. for 27 percent more than its stock price, stoking valuations of other building-related companies.

Warehouse Group Ltd. climbed 0.3 percent to NZ$6.90. It's almost doubled this year on speculation founder Stephen Tindall and Australian buyout firm Pacific Equity Partners may renew their bid after abandoning their initial offer in October to take the company private.

``Merger and acquisition activity has been the key fuel,'' said Andrew Bascand, who helps manage the equivalent of $977 million in New Zealand equities at AllianceBernstein LP in Wellington. ``There's so much money with these private equity funds that I can't see any lessening of the pace'' through the first half of next year.

Advanced Info Service Pcl (ADVANC TB)
AU Optronics Corp.(2409 TT)
Bangkok Bank Pcl (BBL TB)
Cemex SA  VCP SM
Fletcher Building Ltd. (FBU NZ)
Honda Motor Co. (7267 JT)
LG Electronics Inc. (066570 KS)
NEC Corp. (6701 JT)
PTT Pcl (PTT TB)
PT Bumi Resources (BUMI IJ)
PT Telekomunikasi Indonesia (TLKM IJ)
Rinker Group Ltd. (RIN AU)
Samsung Electronics Co. (005930 KS)
Toyota Motor Corp. (7203 JT)
Tenaga Nasional Bhd. (TNB MK)
Venture Corp. (VMS SP)
Warehouse Group Ltd. (WHS NZ)

To contact the reporter for this story: Stuart Kelly in Sydney skelly22@bloomberg.net

Last Updated: December 20, 2006 05:11 EST