East Asian investors are upbeat on banking gains SINGAPORE: East Asian stocks climbed for a sixth week, led by Resona Holdings Inc and Hana Bank, after policy makers signaled an end to deflation in Japan and Standard & Poor’s raised its ratings on 25 lenders. “Asian banks have strived to improve their asset quality since the 1997 financial crisis,” said Parker Wu, who helps manage about $3.1bn including shares of Taiwanese financial companies at Shinkong Investment Trust Co in Taipei. “I see solid profit outlook for Asian banks.” The Morgan Stanley Capital International (MSCI) Asia-Pacific Index, which tracks more than 1,000 stocks in the region, gained 3.2% to 113.19, reaching a five-year high this week. It gained for a fourth consecutive month and climbed for the first quarter in three. Raw-material producers including BHP Billiton and Nippon Steel Corp rallied this week, extending their lead as the region’s best-performing industry group for the quarter, after metal prices climbed and a report on US durable-goods orders suggested increasing investment in the world’s largest economy. The Nikkei 225 Stock Average gained 3.2% this week, and closed at its highest since May 2001. Key stock indexes reached records in Australia, South Korea and India this week. They rose elsewhere in Asia, except in Indonesia, Thailand, the Philippines and Pakistan. Resona, Japan’s fifth-largest bank by assets, jumped 19% this week. Mitsubishi Tokyo Financial Group Inc jumped 21% to a record. The lender yesterday completed the acquisition of UFJ Holdings Inc, forming the world’s biggest bank by assets. The lender on September 28 raised its first-half profit forecast 64% as it reduced bad-loan costs. Miyako Suda, a Bank of Japan policy maker, this week said the central bank is “getting closer” to the point where it can change its policy of flooding the economy with cash. “The reality of Japan’s economic recovery is catching up with the market’s expectations finally and it’s looking promising,” said Yoshitaka Saeki, who helps look after $344bn in assets worldwide as a fund manager at Alliance Capital Management Ltd in Tokyo. “You can actually start to see that bank lending will increase and that’s a positive.” Hana Bank, South Korea’s No 4 lender, surged 17% this week. Fuhwa Financial Holdings Co, the 12th biggest of Taiwan’s 14 financial holding companies, gained 13%. Hana Bank and three other South Korean lenders had their foreign-currency debt ratings raised to A- by S&P, their highest level on record, according to Bloomberg data. It also raised ratings at Kookmin Bank and Shinhan Bank to A-, the highest since December 1997. The ratings agency also raised its ratings on some lenders in China, Taiwan, Thailand and Malaysia. S&P said $500bn of state aid since the 1997 currency crisis has improved the finances of lenders in Asia, and upgraded them on evidence Asian governments will provide “extraordinary assistance” should they become distressed. “The upgrade in ratings is positive for shares of lenders and will give them some more room to rise higher,” said Choi Chang Hoon, who helps oversee about $770mn at Woori Asset Management Co in Seoul. The MSCI Materials Index, which tracks shares of companies including BHP, surged 4.3% this week, taking its quarterly advance to 20.4%. BHP, the world’s biggest mining company, climbed 4.5% and reached a record on September 29. Rio Tinto Group, the third biggest, added 6.4%. Copper prices reached a record $1.7535 a pound on September 29, extending a four-month rally, on speculation demand may increase for the metal used in manufacturing, wiring and construction. “With commodities prices still firm, these stocks should continue to benefit for some time,” said Hans Kunnen, who helps manage about $54bn at Colonial First State in Sydney, Australia’s No 1 fund manager. “Commodities stocks have been leading the charge the past quarter.” Nippon Steel, Japan’s biggest steelmaker, surged 16%. Posco, Asia’s third-biggest steel producer, added 5.9%. US orders for items made to last at least several years rose 3.3% in August, the Commerce Department said, almost five times the 0.7% estimate gain in a Bloomberg News survey of economists. Shipments increased the most this year and unfilled orders accumulated, bolstering confidence that businesses in the US, Asia’s biggest export destination, will probably resume spending after a pause in the wake of Hurricanes Katrina and Rita. Asian stocks fell in US trading on Friday, paced by energy shares including PetroChina Co as oil prices slipped. The Bank of New York Co’s Asia ADR Index, which tracks the region’s American depositary receipts, lost 0.8% to 124.93, cutting its gain for the week to 4.3%. PetroChina, the country’s top oil producer, declined 83¢ to $83.37. CNOOC Ltd, China’s largest offshore oil company, fell 45¢ to $72.19. Airline stocks gained as concern eased that rising fuel costs will hurt earnings. China Southern Airlines Co, the nation’s No 2 carrier, added 8¢ to $14.35. China Eastern Airlines Corp, the third biggest, rose 7¢ to $15.41. Nikkei 225 Stock Average futures expiring in December closed at 13,665 in Chicago, higher than the close of 13,560 in Osaka and 13,550 in Singapore. – Bloomberg