Asian Stocks Gain as China Refrains From Raising Rates, U.S. Data Improves

Asian stocks rose for the second week this month, as steelmakers led gains, after China refrained from raising interest rates and U.S. data improved.

BlueScope Steel Ltd., Australia’s largest steelmaker, advanced 9.1 percent in Sydney. Honda Motor Co., which counts North America as its biggest market, gained 3 percent in Tokyo. China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, lost 2.9 percent after a report that China will toughen controls in the property market. HSBC Holdings Plc, Europe’s largest lender, lost 1.7 percent in Hong Kong after Moody’s Investors Service put Spain and Greece’s credit rating on review.

The MSCI Asia Pacific Index climbed 0.4 percent to 133.59 this week. The gauge closed up on three days this week, and rose the most on Dec. 13, after China refrained from raising interest rates to cool inflation, and U.S. reports on consumer confidence, the trade deficit and claims for jobless benefits beat forecasts.

“Fears of an interest rate increase in China have not come to fruition so far,” said Tim Schroeders, who helps manage $1 billion in Melbourne at Pengana Capital Ltd. “There’s a sense of relief in markets. This may be only temporary as Chinese authorities become increasingly concerned about the possibility of inflationary pressures undermining the economy’s longer-term growth prospects.”

Regional Benchmarks

In Japan, the Nikkei 225 Stock Average gained 0.9 percent, its seventh straight weekly advance and its longest winning streak since the eight-week period ended April 2. Australia’s S&P/ASX 200 Index climbed 0.4 percent. South Korea’s Kospi index rose 2 percent.

Hong Kong’s Hang Seng Index declined 1.9 percent while the Shanghai Composite Index rose 1.9 percent this week. India’s Sensitive Index rose 1.8 percent. The measure was closed on Dec. 17 for a holiday.

Steelmakers led gains this week, with a gauge tracking material shares rising 1 percent, the most among the 10 industry groups on the MSCI Asia Pacific index.

BlueScope Steel, which receives 22 percent of its sales from Asia, rose 9.1 percent to A$2.29 in Sydney. JFE Holdings Inc., Japan’s second-largest steelmaker, rose 2.7 percent to 2,836 yen in Tokyo. JSW Steel Ltd., an Indian producer of the metal, jumped 12 percent to 1,164.75 rupees in Mumbai.

While China’s inflation accelerated to the fastest pace in 28 months in November, building the case for Premier Wen Jiabao to raise interest rates, China instead ordered lenders on Dec. 10 to park more money with the central bank to counter the inflation threat.

Effective Tool

“The government seems to be using reserve requirements at the moment as a more effective tool,” Hugh Simon, co-manager of the Dreyfus Greater China Fund, said in a Bloomberg Television interview. “They need to have some relief about inflation. The market is not expensive.”

The MSCI Asia Pacific Index has risen 11 percent this year, with stocks on the gauge valued at 14.8 times estimated earnings on average, compared with 23 times at the start of the year.

Exporters to the U.S. gained after improving data from the world’s biggest economy boosted confidence the recovery was continuing.

Honda, Japan’s second-largest automaker by market value, gained 3 percent to 3,235 yen this week. Canon Inc., the world’s largest camera maker, climbed 1 percent to 4,145 yen. James Hardie Industries SE, the biggest seller of home siding in the U.S., increased 2.5 percent to A$6.68 in Sydney.

Consumer Confidence

Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey.

A Commerce Department report showed the U.S. trade deficit shrank to $38.7 billion in October, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January.

The number of U.S. workers filing first-time claims for unemployment benefits unexpectedly declined last week, pointing to a labor market that is on the mend. Applications for jobless insurance payments decreased by 3,000 to 420,000, the lowest in three weeks, Labor Department figures showed. Economists in a Bloomberg survey projected a median rise in claims to 425,000.

U.S. Employment

China Overseas Land slid 2.9 percent to HK$14.58. China Resources Land Ltd., a state-controlled developer, declined 1.6 percent to HK$13.54. Guangzhou R&F Properties Co., the biggest builder in the southern Chinese city, dropped 1.9 percent to HK$10.64.

China will strengthen controls in the real-estate market and curb speculative investment from next year through 2015, Xinhua News Agency reported on Dec. 16, citing China’s Ministry of Housing and Urban-Rural Development.

“The next curb on property is likely to be a unit tax,” said Andrew Sullivan, director of institutional sales at OSK Securities Hong Kong Ltd. “Some investors are locking in gains running to year end.”

HSBC Holdings, which receives 36 percent of its revenue in Europe, slid 1.7 percent to HK$80.15 in Hong Kong. Li & Fung Ltd., which is the biggest supplier to Wal-Mart Stores Inc. and gets 27 percent of its sales from Europe, dropped 2.3 percent to HK$43.80.

Spain’s credit rating may be cut from Aa1 by Moody’s Investors Service on concern about rising borrowing costs, potential losses in the banking system and deficits in the country’s regions, the ratings agency said on Dec. 15.

Moody’s also put Greece’s Ba1 bond ratings on review for a possible downgrade, citing heightened concerns about whether the country will be able to reduce its debt to “sustainable levels,” and Ireland’s credit rating was cut five levels by Moody’s on Dec. 17, after the government last month was forced to ask for external aid.