Asian stocks capped the biggest weekly gain since January as euro-zone leaders agreed to relax conditions for recapitalizing lenders and amid speculation China will do more to shore up growth. The advance pared the regional benchmark index’s first quarterly loss since September.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, advanced 2.7 percent in Tokyo after leaders of the 17 euro countries dropped a requirement that governments get preferred creditor status on crisis loans to Spain’s banks. China Overseas Land & Investment Ltd. advanced 7.3 percent in Hong Kong. Toyota Motor Corp., Asia’s biggest carmaker by market value that gets 21 percent of its sales in North America, gained 3.4 percent in Tokyo after U.S orders for durable goods and the number of contracts to buy existing homes rose.
The MSCI Asia Pacific Index rose 2.7 percent to 117.22 this week, the biggest advance since the week ended Jan. 20. The gauge advanced 4.1 percent this month, paring its quarterly loss to 7.4 percent.
“It seems very significant,” said Jonathan Garner, Hong Kong-based chief strategist at Morgan Stanley, of the European leaders’ decision. “One of the key problems around Greece was the official lenders putting themselves in a senior position to existing bondholders, and that immediately impaired the Greek government debt. One of the worries the market’s had about the Spanish bank bailout is that the same thing would be repeated.”
The Asian benchmark index rose 3 percent in the first six months of 2012. Stocks in the index are valued at 12 times estimated earnings on average.
Financial companies and health-care stocks led gains through the first half. Materials and energy companies had the biggest declines among the Asia-Pacific gauge 10 industries as Europe’s crisis and China’s slowdown sent commodity prices into a bear market.
Hong Kong’s Hang Seng Index gained 2.4 percent this week after Hong Kong Exchanges & Clearing Ltd., the world’s No. 2 bourse operator by value, agreed to set up a joint venture to develop equity derivative products with its mainland Chinese counterparts.
Regulators on both sides of the border announced after markets closed June 29 that they had approved for listing in China the first exchange-traded funds to track Hong Kong indexes. A yuan-denominated ETF in Hong Kong will track shares traded on the Shanghai and Shenzhen bourses.
The announcement coincided with a visit to the former British colony by China’s President Hu Jintao to mark the 15th anniversary of Hong Kong’s return to China. The Shanghai Composite Index lost 1.6 percent before the government releases data on China’s manufacturing in June.
Japan’s Nikkei 225 Stock Average climbed 2.4 percent, a fourth weekly gain, after the nation’s retail sales grew more than expected in May. South Korea’s Kospi Index added 0.4 percent. Australia’s S&P/ASX 200 Index rose 1.2 percent.
Stocks surged on June 29 as European leaders meeting in Brussels said Spanish banks can be recapitalized directly with European bailout funds rather than being channeled through governments, European Union President Herman Van Rompuy said.
German Chancellor Angela Merkel said Germany’s philosophy that financial aid must carry conditions remains in place after European leaders eased repayment rules on emergency loans.
Asian banks gained. Mitsubishi UFJ added 2.7 percent to 378 yen. Westpac Banking Corp., Australia’s No. 2 lender by market value, advanced 1.8 percent to A$21.13. HSBC Holdings Plc, Europe’s biggest lender, rose 1.6 percent to HK$68.55 in Hong Kong.
“Europe keeps making bold statements, then diluting them shortly afterwards,” Mark Matthews, head of research Asia for Bank Julius Baer & Co., which manages $281 billion in client assets worldwide, said in an e-mail interview in Singapore. “These are only vague encouraging words, which have produced excitement and euphoria. They will almost certainly be followed by denials and delays, and confusion in the marketplace as it comes to grips with the fact that it has been fooled again.”
Chinese property developers advanced as China may introduce “more proactive” policies to ensure stable growth, according to the China Securities Journal. The government may expand infrastructure investment, fine-tune monetary policies and reduce taxes, according to a commentary which was published on the front page of the newspaper.
China Overseas Land gained 7.3 percent to HK$17.98. China Resources Land Ltd. advanced 4.4 percent to HK$15.80 and Guangzhou R&F Properties Ltd. rose 1.9 percent to HK$10.18.
Stocks also advanced after the index of U.S. pending home resales climbed 5.9 percent after a 5.5 percent decline in April. Orders for durable goods rose 1.1 percent.
Companies that do business the U.S. gained. Toyota rose 3.4 percent to 3,190 yen. Techtronic Industries Co., maker of Ryobi power tools and Hoover vacuum cleaners that depends on North America for 72 percent of its sales, added 7.2 percent to HK$9.73 in Hong Kong.
Among stocks that fell this week, Billabong International Ltd., Australia’s largest surf-wear maker, slumped 26 percent to A$1.075 in Sydney after selling A$155 million ($158 million) of new shares. Billabong has had its recommendation cut to sell by analysts at Citigroup and UBS since reducing its earnings target on June 21 and announcing the share sale.