Gold Drops to $1,200/oz for First Time Since June in New York
Asian Stocks Advance as China Eases, Central Banks Act on Crisis
Asian stocks jumped, with the regional index set for its biggest gain in more than two months, after six central banks cut the cost of emergency dollar funding for European banks and China reduced curbs on lending.
Developers Agile Property Holdings Ltd. (3383) and Evergrande Real Estate Group Ltd. (3333) gained at least 15 percent, leading a gauge of Chinese companies listed in Hong Kong to its largest jump since 2008. Hitachi Construction Machinery Co., a Japanese manufacturer that depends on China for about a quarter of sales, jumped 7.3 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, gained 4.1 percent in Sydney after commodity prices rose.
“The coordinated dollar funding by six central banks helps to ease concerns about a market collapse,” said Ryota Sakagami, Tokyo-based chief strategist at SMBC Nikko Securities. “The reduction of reserve requirements in China will lead to an increase in money supply and that’ll push up the stock market in China. It also enhances the expectation that China will turn its policy stance toward monetary easing from now on.”
The MSCI Asia Pacific Index rose 3.2 percent to 117.19 as of 7:50 p.m. in Tokyo, headed for its largest gain since Sept. 27. All but one 10 industry groups on the measure advanced, with about six stocks (MXAP) gaining for each that declined.
The index, priced in dollars, fell during normal trading yesterday before turning positive overnight as the joint action by central banks spurred gains in the Japanese yen and the Australian dollar, inflating the value of stocks denominated in those currencies.
Hang Seng Jumps
Hong Kong’s Hang Seng Index jumped 5.6 percent, its second- biggest gain since April 2009, while China’s Shanghai Stock Exchange Composite Index increased 2.3 percent. Japan’s Nikkei 225 Stock Average (NKY) rose 1.9 percent. Australia’s S&P/ASX 200 index gained 2.6 percent. South Korea’s Kospi Index advanced 3.7 percent.
The MSCI Asia Pacific Index sank 6.7 percent last month, compared with a 0.5 percent drop by the S&P 500 and a 1.4 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.5 times for the Stoxx 600.
The Standard & Poor’s 500 Index (SPXL1) jumped 4.3 percent in New York yesterday, its biggest gain since Aug. 11, after the Federal Reserve and five other central banks took action on Europe’s debt crisis by making it cheaper for lenders to borrow in dollars. Futures on the S&P slipped 0.2 percent today.
Clear Easing Signals
“There’s optimism European leaders will this time come up with a decent and specific solution to the debt crisis,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co. “There’s clear signals that China and other central banks are shifting from tightening to easing policies, and the market’s taking that favorably.”
The MSCI Asia Pacific Index surged 16 percent between Oct. 5 and Oct. 28, as news suggesting European leaders are moving closer to containing the region’s debt crisis spurred optimism after the market fell to its lowest since 2009. During the period, European leaders agreed to expand a bailout fund to $1.4 trillion and carved out a second aid package for Greece.
Shares then fell back down by 13 percent through Nov. 25 as Greece proposed a referendum on the aid package, its Prime Minister George Papandreou and Italian counterpart Silvio Berlusconi both stepped down, and German Chancellor Angela Merkel ruled out common euro-area bonds after selling a fraction of the bonds it auctioned.
Reserve Ratio Cut
China lowered reserve requirements for banks, allowing more lending, for the first time since 2008. The central bank’s decision to cut reserve ratios by 50 basis points may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG.
Chinese developers and banks accounted for half of the top 10 gains in the MSCI Asia Pacific Index. Agile Property soared 15 percent to HK$6.79, while Evergrande gained 16 percent to HK$3.50 in Hong Kong. China Merchants Bank Co., a Shenzhen-based provider of commercial banking services, increased 14 percent to HK$15.84.
China National Building Material Co. (3323), a maker of the building materials, jumped 16 percent to HK$10.18. Hitachi Construction rose 7.3 percent to 1,423 yen in Tokyo.
Measures of energy and material companies had the biggest gains among the 10 industries in the Asia-Pacific gauge. BHP rose 4.1 percent to A$36.35 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, jumped 13 percent to HK$19.30 in Hong Kong. Mitsubishi Corp., Japan’s biggest trading company by market value, increased 4.7 percent to 1,624 yen in Tokyo.
Crude oil for January delivery rose 0.6 percent to $100.36 a barrel in New York yesterday. The London Metal Exchange Index of prices for six industrial metals soared 5 percent.
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