Sept. 27 (Bloomberg) -- Asian stocks rose to a two-month high as speculation heightened that the U.S. Federal Reserve will cut interest rates and a report showed South Korean consumers are the most upbeat in five years.

Mizuho Financial Group Inc. and Macquarie Bank Ltd. climbed after a bigger-than-forecast drop in U.S. durable goods orders boosted expectations borrowing costs will fall and help contain turmoil in credit markets. Samsung Electronics Co., South Korea's largest company by value, gained the most in four weeks.

``We think the Fed can cut rates further once or twice,'' said Kim Woo Sik, who manages the equivalent of $290 million at SH Asset Management Co. in Seoul. ``There's definitely optimism about the Korean economy.''

Sony Corp. advanced to a three-week high after the yen weakened against the dollar, increasing the value of Japanese exporters' U.S. sales. Hynix Semiconductor Inc. jumped after the Seoul Economic Daily said the company is boosting production of memory chips.

The Morgan Stanley Capital International Asia-Pacific Index added 1.7 percent to 161.30 as of 12:49 p.m. in Tokyo, set for the highest since July 24, when the measure closed at a record. A measure of financial stocks was the biggest contributor to the benchmark's gains.

Japan's Nikkei 225 Stock Average rose 1.5 percent to 16,688.64, set for its first three-day rally since the period ended Aug. 9. South Korea's Kospi index rose 1 percent following a three-day holiday. Hong Kong's Hang Seng Index breached 27,000 for the first time, while benchmarks in Australia and Singapore headed for record highs. Other markets open for trading climbed.

Banks Rally

U.S. stocks advanced yesterday by the most in a week as General Motors Corp. agreed on a contract with a labor union that will get rid of $50 billion of health-care costs and investors speculated billionaire Warren Buffett will buy a stake in Bear Stearns Cos.

Demand for U.S.-made durable goods dropped 4.9 percent in August, the most in seven months. Orders were forecast to fall 4 percent, according to economists surveyed by Bloomberg News.

Mizuho, Japan's second-largest lender, added 2.9 percent to 646,000 yen. Sumitomo Mitsui Financial Group Inc., the third biggest, jumped 4.9 percent to 874,000 yen. Macquarie Bank, Australia's No. 1 securities firm, gained 2.7 percent to A$82.41.

Futures contracts yesterday suggested an 86 percent chance the Fed will lower its target overnight lending rate between banks by a quarter-percentage point to 4.50 percent at its next meeting Oct. 31, compared with 72 percent a week ago.

Encouraging Investors

``The prospect of another rate cut in the U.S. is driving positive sentiment for equities and emerging markets,'' said Olan Caperina, who helps manage $5 billion of global assets at BPI Asset Management Inc. in Manila. ``A rate cut will boost the U.S. economy and encourage investors to look for assets with higher yields like equities.''

Bear Stearns shares surged 7.7 percent yesterday after the New York Times reported that the securities firm is in ``serious talks with several outside investors'' including Buffett to sell as much as 20 percent of the firm. A Bear Stearns spokesman declined to comment. Jackie Wilson, a spokeswoman for Buffett, said nobody was available to comment.

The newspaper report ``sparked a notion that the subprime issue may not have been that serious,'' said Horoshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo.

National Australia Bank Ltd., the country's largest lender, rose 2.2 percent to A$39.87. Australia & New Zealand Banking Group Ltd., the third biggest, gained 1.2 percent to A$29.27. HSBC Holdings Plc, the U.K. bank that was among the first to disclose soured U.S. home loans seven months ago, added 0.4 percent to HK$142.60 in Hong Kong.

Samsung, Sony

Samsung Electronics, Asia's largest maker of mobile phones and memory chips, climbed 3.2 percent to 551,000 won. Kookmin, South Korea's largest lender, gained 1.9 percent to 75,100 won.

The consumer sentiment index increased to 112 in the third quarter from 108 in the previous three months, the Bank of Korea said in a report released in Seoul today. A reading higher than 100 indicates optimists outnumber pessimists.

Sony, the maker of the Vaio computer and the PlayStation game console, added 2.4 percent to 5,560 yen. Nintendo Co., whose Wii game console has outsold rivals in the U.S. this year, climbed 0.8 percent to 60,300 yen.

Yen, Chipmakers

The yen recently traded at 115.49 against the dollar, down from 114.76 at yesterday's equity market close. A stronger dollar means Japanese exporters get more for their overseas sales when converted to yen while their products become more competitive.

``The weaker yen is a positive support to the market,'' said Juichi Wako, a strategist at Nomura Securities Co. in Tokyo.

Toyota Motor Corp., Japan's largest automaker, added 1.4 percent to 6,700 yen. The company's annual operating profit falls about 35 billion yen for every 1 yen that Japan's currency gains against the dollar, according to Koji Endo, a senior analyst at Credit Suisse Group in Tokyo.

Hynix, the world's second-largest maker of memory chips, rose 4.8 percent to 30,600 won. Hynix is boosting output of memory chips for computers and consumer electronics to meet this year's sales target of $10 billion, the Seoul Economic Daily said, citing an unidentified company official. The report didn't specify by how much it increased production.

Powerchip Semiconductor Corp., Taiwan's No. 3 maker of memory chips, gained 3.8 percent to NT$16.10. Nanya Technology Co., the island's second-largest memory-chip maker, added 4.7 percent to NT$22.10.

Prices may rise as demand picks up toward the end of the year, Dramexchange, Asia's largest spot market for dynamic random access memory chips, wrote in a report yesterday.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net

Last Updated: September 26, 2007 23:57 EDT