Asian Stocks Post Weekly Gain as Confidence in Economy Rises

May 9 (Bloomberg) -- Asian stocks rose this week, extending a two-month rally, as regional bank earnings, stress tests for U.S. banks and an expansion in Chinese manufacturing activity boosted optimism that the worst of the financial crisis is over.

United Overseas Bank Ltd., Singapore’s second-biggest bank, jumped 28 percent after posting first-quarter earnings that beat analyst estimates. PetroChina Co., the nation’s biggest oil producer, surged 21 percent as crude oil futures climbed. Yuanta Financial Holdings Co., Taiwan’s biggest brokerage, gained 28 percent after Goldman Sachs Group Inc. upgraded the stock.

The MSCI Asia Pacific Index added 7.8 percent this week to 97.99, a level not seen since Oct. 7. Asian markets have rallied 39 percent since the MSCI benchmark dropped to an almost six- year low on March 9.

“People are realizing that, although things aren’t wonderful, the rate of decline is slowing,” said Montana-based Don Gimbel, who helps manage $2 billion of international equities at Carret & Co. “There is the anticipation that over the next 18 months things are going to get better.”

The Nikkei 225 Stock Average added 5.1 percent in a trading week that was shortened by May 4-6 holidays. Singapore’s Straits Times Index surged 17 percent, the most since at least September 1999, as United Overseas and the city’s two other banks reported better-than-estimated first-quarter results.

Markets shrugged off the outbreak of swine flu even as the World Health Organization confirmed the disease in more than 2,000 people in at least 24 countries.

Swine Flu

MSCI’s Asian index plunged by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to idle factories and lay off workers.

“Investors who have been on the sidelines are slowly plowing back funds into equities, fearing they might miss the rally,” said John Koh, who helps oversee $1.1 billion at MEAG Hong Kong Ltd. “The swine flu outbreak is a concern but everyone seems well-prepared to contain it.”

The MSCI gauge has rallied amid signs government measures to ease the financial crisis are working. Earnings estimates for companies included in the MSCI benchmark started to rise in April after a year of falling predictions, data compiled by Bloomberg show.

United Overseas Bank gained 28 percent to S$14.74. The company reported on May 6 a 23 percent drop in first-quarter profit to S$409 million ($280 million), beating the S$384 million mean estimate of six analysts surveyed by Bloomberg.

China Manufacturing

Bank stocks also gained as the Federal Reserve determined 10 banks needed to raise a total of $74.6 billion in capital, following stress tests on the largest U.S. lenders. Chairman Ben S. Bernanke said the tests were a “good start” toward regulation of broad-based risks to the U.S. financial system.

Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, Surged 23 percent to 655 yen. National Australia Bank Ltd., the nation’s biggest lender by assets, climbed 9.7 percent to A$22.78. Industrial & Commercial Bank of China, the nation’s biggest bank, added 7.6 percent to HK$4.80.

“With the conclusion of the U.S. bank tests, concerns that the global financial system will collapse and the economic slump will continue have dissipated,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees about $9.3 billion.

Stress Test

PetroChina climbed 21 percent to HK$8.31 as oil futures in New York jumped 10.2 percent. Yuanta climbed 28 percent to NT$24.75 in Taipei after Goldman Sachs upgraded its rating to “buy” from “neutral.”

Stocks in Taiwan also advanced in the week on optimism closer ties with China will boost domestic growth. The Taiex Index added 9.9 percent. It’s risen for seven-straight days.

“Shares have rallied for so many sessions, as foreign investors and Taiwan investors are all betting on better relations with China,” said Parker Wu, a Taipei-based fund manager at the Agriculture Bank of Taiwan, who helps oversee the equivalent of $44 million.

The recovery in Chinese manufacturing activity boosted shares in Chinese coal producers and utility companies. China Shenhua Energy Co., the nation’s largest coal producer, gained 15 percent to HK$25. Huadian Power International Corp. , a unit of China’s fourth-largest electricity producer, rose 11 percent to HK$2.04.

The CLSA China Purchasing Managers’ Index rose in March, the first gain in nine months, CLSA Asia Pacific Markets said on May 4.