* Hong Kong stocks outperform, led by 4.5 pct rise in HSBC
* Japan's Nikkei touches 1-month high, banks support
* Speculation rampant over Fed stance on buying Treasuries
* Eyes on whether Bank of Japan will buy more JGBs
By Kevin Plumberg
HONG KONG, March 18 (Reuters) - Asian stocks inched higher
on Wednesday after a financial sector-driven rally pushed them
to one-month highs this week, while U.S. Treasuries edged up on
speculation the Federal Reserve may take the unorthodox step of
buying government debt to push down interest rates.
As benchmark rates head to zero in advanced economies but
economic data continue to reflect weakness, investors have
focussed on what other actions policymakers will take to
achieve stability.
Shares of large Japanese banks jumped 2-3 percent after the
Bank of Japan said on Tuesday it would offer $10.2 billion in
subordinated loans to lenders to shore up their capital base.
Japanese government bonds, meanwhile, were steady ahead of
the end of a Bank of Japan meeting later in the day. Economists
said there was a 50/50 chance policymakers would increase
purchases of government debt, effectively taking the country
closer to printing money to battle a deepening recession.
"Investors are chasing banks, also as they think the
central bank might soon decide more measures to help the
financial sector." said Shinji Igarashi, equity manager of the
sales department at Chuo Securities in Japan.
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> inched up 0.2 percent after climbing more than
7 percent since the month began. Gains in U.S. stocks overnight
after an unexpected jump in housing starts buoyed sentiment,
but investors remained cautious over whether the rally can be
sustained.
Twenty-day rolling returns on the index of 4 percent
exceeded the 0.7 decline on the MSCI all-country world index
<.MIWD00000PUS> and the roughly 3 percent yielded by the
10-year U.S. Treasury note <US10YT=RR>.
Japan's Nikkei share average <> was up slightly on the
day, at 0.1 percent after briefly trading at a one-month high.
Banks were some of the clear outperformers, with Sumitomo
Mitsui Financial Group <8316.T> and Mizuho Financial Group
<8411.T> both up 3 percent on hopes the global financial system
was stabilising.
Hong Kong's Hang Seng index <> rose 1.5 percent,
propelled by a 4.5 percent jump in shares of HSBC <0005.HK>.
Bargain hunters and institutional investors have laid waste
to short sellers of Europe's largest lender, with the stock up
nearly 40 percent since last week when doubts grew ahead of a
massive rights issue.
U.S. Treasuries crept higher as some dealers bet the Fed
would lean closer to buying long-dated government debt to pull
down interest rates of things like mortgages.
The yield on the benchmark 10-year note ticked down to 2.99
from 3.0 percent overnight in New York. Since the beginning of
the year, the yield has risen some 75 basis points but has
stopped cold around 3 percent.
Uncertainty about what the Fed and other policymakers are
willing to do has kept investors cautious about diving back
into riskier fixed-income products or straying too far from
long-maturity government debt.
"Having lowered interest rates aggressively, authorities
are now turning to less conventional measures such as
quantitative easing. The extent and timing of the positive
impact of this policy on the economy is not yet known and the
short-term effect on markets may be heightened volatility,"
said Quentin Fitzsimmons, a fund manager at Threadneedle in
London.
Japanese government bond futures were flat ahead of the
outcome of the BOJ policy meeting later in the day. It is
expected to keep rates on hold at 0.10 percent but board
members may consider further steps for the future.
The euro held close to a recent one-month high on the
dollar and briefly forged an 11-week peak against the yen, as
increasing tolerance of risk among investors inspired them to
leave behind currencies associated with relative safety.
The euro was steady at $1.3020 <EUR=>, after gaining 0.4
percent in the previous session. It hovered below Monday's
five-week high of $1.3072.
The euro hit its highest since late December at 128.83 yen
in early Asian trade but then retreated to stabilise almost
unchanged on the day at 128.30 yen <EURJPY=>.
Gold was flat at $914.05 per ounce <XAU=> in the spot
market, still vulnerable to bouts of profit taking as a global
equity market rally gains pace.
U.S. crude for April delivery slipped 0.6 percent to $48.84
a barrel <CLc1> after gaining 2.9 percent overnight after U.S.
housing market data showed the biggest monthly gain in starts
since 1990.
(Additional reporting by Aiko Hayashi in TOKYO; Editing by Kim
Coghill)
