Asian Stock Index Has Biggest Weekly Increase in Three Months

Dec. 1 -- Asian stocks rose this week, trimming the regional benchmark's biggest monthly decline in 1 1/2 years, as investors bet the U.S. Federal Reserve will lower borrowing costs to bolster growth in the world's largest economy.

Mitsubishi UFJ Financial Group Inc. and Commonwealth Bank of Australia led gains by banks. BHP Billiton Ltd., the world's biggest mining company, tracked metals prices higher.

``A rate cut is being viewed as more likely,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets. ``That will provide short-term relief to the market because there have been concerns about the risks that might result if credit costs remain high.''

The MSCI Asia Pacific Index added 4.9 percent to 161.92 this week, snapping a three-week, 8.4 percent slump. The 1,055- member benchmark dropped 5.5 percent in November, its worst month since May 2006.

Japan's Nikkei 225 Stock Average rose 5.3 percent. The Hang Seng Index jumped 7.9 percent, the region's biggest advance, as speculation Hong Kong's borrowing costs will be lowered boosted shares of Sun Hung Kai Properties Ltd. and other developers.

China's Shanghai Composite Index lost 3.2 percent, capping its steepest monthly drop in at least 12 years, on concern the government will impose further measures to rein in asset prices.

`Taking Out Insurance'

Mitsubishi UFJ, Japan's biggest publicly traded bank, surged 17 percent to 1,089 yen. Mizuho Financial Group Inc., the second largest, jumped 14 percent to 595,000 yen. Japanese banks had 1.3 trillion yen ($12 billion) in investments tied to U.S. subprime mortgages as of Sept. 30, Japan's chief financial regulator said Nov. 22.

Commonwealth Bank, Australia's largest home lender, climbed 4.3 percent to A$59.65. DBS Group Holdings Ltd., Singapore's biggest bank, added 5.8 percent to S$20.10.

``The Fed's taking out insurance on the economy and trying to pump margin into the balance sheets of banks and businesses,'' said Donald Williams, who helps manage the equivalent of $1.3 billion at Platypus Asset Management in Sydney.

The Standard & Poor's 500 Index rose 0.8 percent yesterday, taking its weekly gain to 2.8 percent, after Fed Chairman Ben S. Bernanke said on Nov. 29 policy makers must decide whether the risks between growth and inflation have shifted.

Rate Cut Bet

The previous day, Vice Chairman Donald Kohn said decision makers must be ``flexible and pragmatic'' in response to a credit market ``deterioration.'' Federal funds futures show traders expect a reduction in the benchmark U.S. rate on Dec. 11.

Sun Hung Kai, Hong Kong's biggest developer by market value, surged 15 percent to HK$161.20, the most since the five days ended Aug. 24. Cheung Kong (Holdings) Ltd., controlled by China's richest man, Li Ka-Shing, jumped 10 percent to HK$146.30.

Hong Kong's interest rates typically move in step with those in the U.S. because the city's currency is linked to the dollar. Lower rates make mortgages cheaper, spurring demand for real estate.

BHP rose 6.7 percent to A$42.98, snapping a five-week, 15 percent drop. It sold cobalt, a metal used in rechargeable batteries, for a record price this week. Rio Tinto Group, fighting a takeover bid from BHP, rose 13 percent to A$145.19.

A measure of six metals on the London Metal Exchange rose 4 percent, its first weekly advance since the five days ended Oct. 12.

`Ahead of Itself'

In China, the two-year-old CSI 300 Index slid 2.5 percent this week, leading to its biggest monthly decrease on record. The Shanghai Composite dropped 3.2 percent, capping its worst month since Bloomberg started keeping records on the measure in February 1995.

PetroChina Co., the world's biggest company, slumped 8.9 percent to 31.52 yuan. Citic Securities Co., China's largest brokerage, dropped 5.2 percent to 83.89 yuan.

China has raised interest rates five times this year. It should further increase rates and consider selling state-owned shares in companies to control the build up of a ``bubble'' in the country's stock market, Zhu Mingchun, the legislature's finance research director, said yesterday.

``Continued talk of further monetary tightening is weighing on the market,'' said Shane Oliver, who helps manage the equivalent of $103 billion at AMP Capital Investors in Sydney. ``The correction may not have run its course. The market has risen dramatically and got ahead of itself and is due for a pullback.''