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Asian stocks advance as Chinese central bank cuts interest rates

[SYDNEY] Asian stocks gained after Chinese policy makers increased efforts to spur growth in Asia's largest economy.

Almost two shares rose for each that fell, as the MSCI Asia Pacific Index added 0.2 per cent to 146.44 as of 9:08 a.m. in Tokyo. The measure increased 4.2 per cent in February, its largest monthly advance since September 2013, as Greece brokered a deal with creditors to extend bailout funding and Federal Reserve chair Janet Yellen damped concerns of an imminent rate increase.

The People's Bank of China lowered the one-year deposit rate by 25 basis points to 2.5 per cent and the one-year lending rate to 5.35 per cent, effective March 1, the Beijing-based central bank said on its website. China joins a wave of global easing with its second rate cut in three months, as central banks from Singapore to the euro region ramp up monetary policy amid concerns over growth and lackluster inflation.

"China is clearly slowing down, you don't cut rates twice in three months if things are going stunningly well," Mark Lister, head of private wealth research at Craigs Investment Partners, which manages about US$7.2 billion, said by phone from Wellington. "It's clear markets are being driven by other factors besides earnings, and key is the ongoing loose central- bank policy around the world." Reaction in China's stock market, which received a fillip from the PBOC's first interest-rate cut in two years in November, may be muted this time because Saturday's move was largely priced in, said Larry Hu, head of China economics at Macquarie Securities in Hong Kong. Markets in China and Hong Kong are yet to open.

A Chinese factory gauge signaled contraction again in February, a day after the central bank's decision. The government's manufacturing Purchasing Managers' Index was 49.9 last month from 49.8 in January, according to the statistics bureau and the China Federation of Logistics and Purchasing in Beijing. The HSBC Holdings Plc/Markit Economics measure due today is expected to show a final February reading of 50.1, unchanged from the month before.

Japan's Topix index added 0.5 per cent. South Korea's Kospi index advanced 0.3 percent and New Zealand's NZX 50 Index rose 0.2 per cent.

Australia's S&P/ASX 200 Index climbed 0.7 per cent ahead of tomorrow's interest-rate decision. Traders are pricing in a 50 per cent chance the Reserve Bank of Australia will lower the 2.25 per cent cash rate to a record 2 per cent, swaps data compiled by Bloomberg show.

Futures on the Standard & Poor's 500 Index rose 0.2 per cent after the underlying gauge slipped 0.3 per cent on Friday. The US economy expanded at an annualized pace of 2.2 per cent in the fourth quarter, down from an initial estimate of 2.6 per cent. The median forecast of economists surveyed by Bloomberg was for a 2 per cent rate.

BLOOMBERG