* Risk-taking revived but uncertainty lingers
* U.S. dollar hits 2-month low vs euro, down vs yen
* Don't let go of recession trades just yet - JPMorgan
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By Kevin Plumberg
HONG KONG, Dec 15 (Reuters) - Asian stocks climbed 4
percent on Monday on renewed hopes the U.S. automaker industry
would be bailed out, improving investors' willingness to take
risks and pushing the U.S. dollar to a two-month low against
the euro.
Investors have been funnelling capital back to emerging
Asia for the last few weeks and word the White House was
considering using some of $700 billion meant to rescue
financial institutions for the struggling car manufacturers
extended the trend.
Meanwhile, worsening U.S. economic data, a rapidly growing
fiscal deficit and the likelihood the Federal Reserve will cut
interest rates again this week all combined to weaken the
dollar.
"The tide seems to have turned around in recent sessions,
with bad U.S. economic news now rightfully hurting the U.S.
dollar rather than helping it stronger," said Nizam Idris,
currency strategist with UBS in Singapore.
"Further commentary regarding any alternative solutions to
the auto sector will be closely followed during the day, and
hence be key to risk sentiment," Idris said in a note.
Oil meanwhile bounced back $1 to trade above $47 a barrel
<CLc1> on signs that OPEC members might make a deep supply cut
to boost prices when they meet later this week [].
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 3.8 percent on the day and is up about 7
percent so far in December, trying to pull off its first
monthly increase since April.
The main attraction in the region throughout this tough
year has been China's high growth economy, even though the last
few months have seen a severe slowdown. China-related stock
funds have drawn a net $1.48 billion in capital so far this
year, the only broad category tracked by Nomura to register
inflows.
Japan's Nikkei share average <> rallied 5.5 percent
and led the region higher. Shares of Honda Motor Corp <7267.T>
were up 8.5 percent, one of the biggest lifts to the index.
The risk of further declines based on earnings downgrades
has been clearly outweighed by the cheapness of stocks at the
moment. Toyota Motor Co <7203.T> stock is up 9 percent even
after Japanese media reported the world's top automaker is
likely to further cut its earnings forecasts and report an
operating loss of $1.1 billion in the October-March period.
[]
Hong Kong's Hang Seng index <> rose 3 percent, led by
HSBC <0005.HK> and China Mobile <0941.HK>. The one dark blot in
Hong Kong was Bank of China (Hong Kong) Ltd <2388.HK>, which
fell 6 percent after the company warned on Friday its 2008 net
profits could fall "considerably." []
"I am surprised that the equity market is still holding up
so well in Asia. Mutual funds are probably putting their year
end cash balance to work," said Sean Darby, chief Asia
Strategist at Nomura in Hong Kong.
The White House indicated last week it is open to using
part of the bank bailout package for the Big Three car
companies -- Chrysler LLC [], Ford Motor Co <F.N> and
General Motors Corp <GM.N>. A bill that would have provided $14
billion in loans for the firms failed in the Senate on Friday
[], dealing a blow to global equity markets.
TOO EARLY FOR RECOVERY
With some equity valuations at distressed levels, some
investors sitting on cash have begun to think about a recovery
at some point in 2009. However, JPMorgan asset allocation
strategists said it might be too early to let go of recession
trades given the global economy is smack in the middle of the
worst downturn since World War Two.
"There remains sufficient uncertainty about the timing of a
recovery that it is quite easy for credit and equities to
cheapen further, and bonds to rally more before we start the
real recovery trade," they said in a note. "We thus stay with a
portfolio of recessions trades -- long duration in global rates
and defensive exposures in credit and equity markets."
However, Nomura's Sean Darby said corporate bonds are
already cheap, given how much they have sold off this year. For
the time being, bond investors are not as worried about high
returns as they are about staying safe, he said.
The yen was up slightly at 90.90 per dollar <JPY=>, having
rallied to its strongest in 13 years on Friday at 88.10 after
the U.S. auto bailout initially flopped.
The euro rose to highs around $1.3490 <EUR=> on electronic
platform EBS, the highest in almost two months.
There was limited reaction to the Bank of Japan's tankan
business sentiment survey, though the headline index for big
manufacturers' sentiment fell to a near seven-year low of minus
24, down from minus 3 in the previous survey in September.
The rally in stocks sucked money out of the bond market,
pushing up the yield on the benchmark 10-year U.S. Treasury
note <US10YT=RR>, which moves in the opposite direction of the
price, to 2.59 percent from 2.58 percent late in New York on
Friday.
(Additional reporting by Xi Chen; Editing by Dhara
Ranasinghe)
