Asian Stocks Advance on Sony Forecast, Bank Borrowing Costs

May 15 (Bloomberg) -- Asian stocks climbed, paring the MSCI Asia Pacific Index’s first weekly decline in three weeks, after Sony Corp. forecast a smaller loss than analysts expected and bank borrowing costs plunged.

Sony, the world’s No. 2 maker of consumer electronics, jumped 6.5 percent after the company said it will close factories as part of restructuring efforts. HSBC Holdings Plc, Europe’s largest lender by market value, rose 3.5 percent and Tokio Marine Holdings Inc., Japan’s biggest property insurer, gained 4.8 percent on optimism a government bailout of U.S. insurers will further ease the credit crunch.

“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist a Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Like a drunkard waking up with a hangover, investors will eventually be hit with the reality that things haven’t improved overnight.”

The MSCI Asia Pacific Index rose 1.7 percent to 96.86 as of 1:29 p.m. in Tokyo. It declined 1.2 percent this week as the most expensive valuations since 2004 raised concern a two-month stock rally had outpaced earnings prospects.

Japan’s Nikkei 225 Stock Average gained 1.6 percent to 9,234.71. All markets in Asia rose except China.

Tokyo Electron Ltd. climbed 6.6 percent after saying orders for semiconductor equipment will rise this quarter. Rio Tinto Group, the world’s third-largest mining company, surged 7.1 percent in Sydney after saying it remains committed to a $19.5 billion investment from Aluminum Corp. of China. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, gained 2.2 percent on plans to spin off a unit.

Sony Earnings

Futures on the Standard & Poor’s 500 Index added 0.1 percent. The benchmark rose 1 percent yesterday, snapping a three-day losing streak, as declining funding costs boosted bank shares. CA Inc., the world’s second-largest maker of software for mainframe computers, led gains by technology companies after reporting earnings that beat analyst estimates.

The MSCI Asia Pacific Index has climbed 37 percent from a five-year low on March 9 amid speculation the worst of the financial crisis had passed. Shares on the gauge are valued at 32 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.

Sony jumped 6.5 percent to 2,560. The company forecast yesterday it will post a 110 billion yen ($1.1 billion) operating loss this year, better than the median 135.6 billion yen loss estimate in a Bloomberg survey of nine analysts.

The company also said it will close a further five factories in addition to three that have already been announced as part of the company’s restructuring plan.

Borrowing Costs

Hitoshi Kuriyama, an analyst at Merrill Lynch & Co., lifted his price target on Sony by 200 yen to 2,800 because the company “is making steady progress with structural changes and ramping up new business models,” according to a report.

Tokyo Electron, the world’s second-largest supplier of semiconductor production equipment, rallied 6.6 percent to 4,350 yen after saying orders are likely to rise this quarter.

HSBC jumped 3.5 percent to HK$64.65 on optimism central bank efforts to unlock credit markets are bearing fruit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender by value, added 3.4 percent to 608 yen. Tokio Marine gained 4.8 percent to 2,945 yen.

The three-month London interbank offered rate, or Libor, for dollar-denominated loans fell almost three basis points to 0.85 percent yesterday, according to the British Bankers’ Association.

The rate surged as high as 4.8 percent in October in the aftermath of the collapse of Lehman Brothers Holdings Inc. as banks became reluctant to lend to each other amid collapsing financial markets.

Policies ‘Mobilized’

“The drop in Libor is an indication that government policies are being effectively mobilized, and are fueling expectations for a rebound in financial shares,” said Takero Inaizumi, a manager at Mizuho Investors Securities Co. in Tokyo.

The U.S. government approved six insurers for bailout funds from the Troubled Asset Relief Program after investment declines eroded capital across the industry, according to the companies and Andrew Williams, a spokesman for the Treasury.

The bailouts are part of a series of global efforts to alleviate the credit crisis, which has caused losses of more than $1.4 trillion at the biggest banks, insurers and brokerages.

Rio surged 7.1 percent to A$61.67. The company has agreed to sell $7.2 billion of convertible bonds and stakes in projects worth $12.3 billion to Aluminum Corp. and said it remains committed to the deal in a response to a query from the Australian Stock Exchange. The statement helped quell speculation Rio will be forced to boost its capital base with a share sale that would dilute the value of existing stock.

Singapore Air Divestiture

Singapore Airlines gained 2.2 percent to S$11.86 after saying it plans to divest its Singapore Airport Terminal Services Ltd. unit in a stock distribution to shareholders.

“Focusing on their core business is the right thing to do now,” said Christopher Wong, a fund manager at Aberdeen Asset Management Asia Ltd. in Singapore, which oversees $20 billion. “The whole aviation business is going through a very tough period.”

Sumitomo Electric Industries Ltd., which makes electrical wires and cables, soared 11 percent to 1,005. Net income for the year ended in March beat its forecast by 72 percent as a tax code change on overseas dividends lifted profits.