Asian stocks advance on speculation of stimulus

Asian stocks rose amid speculation China will do more to boost growth in the world's second-largest economy, tempering concern about Europe's debt crisis.

Geely Automobile Holdings Ltd led Chinese carmakers higher after BNP Paribas SA said they may benefit from government subsidies. Komatsu Ltd, a Japanese construction machinery maker that gets 14 percent of its sales from China, gained 3.2 percent. Shui On Land Ltd jumped 7.3 percent in Hong Kong after the developer, controlled by billionaire Vincent Lo, said it plans to spin off its Xintiandi entertainment complex unit.

Chinese "leaders are already aware of the slowdown and we're going to see measures coming through in the next few weeks", said Raymond Chan, chief Asia-Pacific investment officer at Allianz Global Investors. The firm oversees about $300 billion. "There's speculation that there will be measures coming out for the auto market. Sooner or later there will be interest-rate cuts."

However, China has no plan to introduce stimulus measures on the scale deployed during the 2008-2009 global financial crisis to counter this year's economic slowdown, Xinhua News Agency reported on Tuesday.

"The Chinese government's intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth," Xinhua said without attributing the information. "The current efforts for stabilizing growth will not repeat the old way of three years ago."

Pumping in government money to achieve growth targets is "not sustainable" and China will instead focus on encouraging private investments in railways, infrastructure, energy, telecommunications, healthcare and education, the story said.

Chinese ministries and the China Securities Regulatory Commission will introduce their own measures to stabilize growth, Xinhua said.

Japan's Nikkei 225 Stock Average added 0.7 percent, reversing earlier losses after a report showed the nation's jobless rate last month rose for the first time since January. Australia's S&P/ASX 200 Index gained 1.1 percent. South Korea's Kospi Index advanced 1.4 percent after the market reopened from a holiday.

Hong Kong's Hang Seng Index advanced 1.4 percent and the Shanghai Composite Index rose 1.2 percent.

Shares rose after China's Finance Ministry said it will allocate as much as 2 billion yuan ($317 million) every year to support purchases of energy-efficient cars.

In Spain, Prime Minister Mariano Rajoy called for a show of force from European authorities to help fund a bailout of the nation's third-biggest lender, BFA-Bankia. Rajoy said on Monday that he wouldn't seek a European rescue for Spain's banks, adding that the European Stability Mechanism should be able to recapitalize struggling lenders directly, bypassing national governments.

'Irreversible project'

"Europe has to dissipate any doubts about the euro," Rajoy said in Madrid. It "must affirm that the euro is an irreversible project and act in consequence".

"The more the crisis progresses, the worse the situation becomes," said Peter Elston, the Singapore-based head of Asia-Pacific strategy at Aberdeen Asset Management, which oversees about $270 billion. "We have a very serious and deteriorating problem in Europe."

Futures on the Standard & Poor's 500 Index rose 0.7 percent on Tuesday. The index slid 0.2 percent in New York on Friday, paring its first weekly rally since April. Financial markets in the US were closed on Monday for the Memorial Day holiday.

Automakers rev up

Geely gained 5 percent to HK$2.92 (38 cents) and Dongfeng Motor Group Co climbed 2.1 percent to HK$13.76 after BNP Paribas SA said they are among the automakers that may benefit from state subsidies targeted at rural motorists. The Ministry of Industry and Information Technology said the incentives were aimed at increasing domestic consumption to counter slower-than-expected economic growth.

Shui On Land rose 7.3 percent to HK$3.08. The Shanghai-based developer has submitted a spinoff proposal to the Hong Kong bourse, Shui On said in a statement on Monday. The company didn't say how much it plans to raise and when the listing is expected be completed.

Shares of Nippon Yusen KK, Japan's largest shipping line by sales, jumped 4.4 percent to 212 yen ($2.67) after Credit Suisse Group AG recommended buying the shares. Komatsu gained 3.2 percent to 1,952 yen.