Asia stocks score biggest monthly jump in a decade

Asian stocks outside Japan finished the first quarter with a dip of around a percent but were up around 14.3 percent in March, the largest monthly gain since April 1999.

HONG KONG, March 31 (Reuters) - Asian stocks edged up on Tuesday to score their biggest monthly rise in a decade as some investors bet the most painful stretch of corporate earnings damage may be over and bought technology shares.

As the first quarter and Japan's financial year draws to a close, stocks, oil prices and higher-yielding currencies gained after a one-day battering on news that the U.S. government was considering pushing General Motors into bankruptcy.

Government bonds retreated as equity markets regained their composure, while the dollar slipped as investors favoured riskier assets.

Asian stocks outside Japan finished the first quarter with a dip of around a percent but were up around 14.3 percent in March, the largest monthly gain since April 1999.

"There has been a huge change in sentiment. Rather than anticipating huge sell-offs in the U.S., we've been anticipating rallies," said Peter Wright, a dealer with Burrell Stockbroking in Sydney.

Many stock markets have thrashed in ranges near last year's lows, with investors cautious about calling a turnaround as the global economy remains mired in a deep recession.

The economic fallout from the financial crisis is still taking a big toll on many economies, with data from Japan showing unemployment rising to a three-year high as the country grapples with its worst recession since World War Two.

Japan's Nikkei average fell 1.5 percent, with investors shrugging off an unexpected announcement of a new government spending package on Tuesday ahead of the Group of 20 gathering of rich and developing nations this week.

The MSCI index of Asia-Pacific stocks outside Japan rose about a percent.

The main indexes in Singapore and India saw gains of well over a percent while Hong Kong, South Korea and China all gained less than a percent.

Australia's main stock index fell 0.6 percent, weighed down by losses in the banking and mining sectors.

South Korean stocks rose 13.5 percent in March, the most since 2001, while the battered won jumped sharply from 11-year lows during the month as worries about the country's foreign debt exposure waned.

The Shanghai Composite has rebounded the most in the January-March quarter with a rise of around 30 percent, making it the best-performing big equity market so far this year after being the hardest hit in 2008.

The tech-heavy Taiwan Weighted index, which rose a marginal 0.1 percent on Tuesday, finished the quarter with a 13.5 percent gain, boosted by incoming orders from China as part of its hefty stimulus spending.

Shares of Taiwan's Compal Electronics, the world's No. 2 contract laptop PC maker, rose 3.2 percent after it said demand from China, the United States and Europe is picking up and it is planning to add about 30 percent more employees by June.

"In the current downturn, tech shares like Compal whose sales and profits could still keep rising, are favourable," said Andrew Deng, a vice president of Taiwan International Securities Corp in Taipei.

Reserve Bank of Australia Deputy Governor Ric Battellino said that there are signs that China's $585 billion in spending to buttress the economy is starting to work.

In credit markets, the iTraxx Asia ex-Japan index of investment-grade credit derivatives widened slightly to 355/360 basis points, pushing out about 20 basis points over the quarter but well off record peaks near 650 basis points hit at the height of the financial crisis last October.

BONDS AND DOLLAR DIP

Government bond yields and swap rates climbed further due to the waves of expected supply tied to government stimulus spending and as expectations grow that some Asian central banks are done cutting interest rates.

Two-year Korean swap rates rose 5 basis points to 3.280 percent and have jumped 56 basis points in the past six weeks from record lows hit in February, causing the swap curve to steepen sharply as the Bank of Korea is seen keeping rates on hold for a while.

Ten-year Japanese government bond yields drifted up a basis point to 1.340 percent and held near a six-week high.

For Japan's 2008-2009 business year ending on Tuesday, the benchmark yield has edged up about 6 basis points as the prospect of more supply to pay for spending has offset the economy's sharp contraction and a likely return of deflation.

The yen fell broadly, reversing the previous day's gains, as repatriation flows by Japanese investors dried up on the last day of the fiscal year, while weak Japanese data also weighed.

Against the yen, the dollar rose 1 percent, while the euro gained 1.5 percent.

But the greenback surrendered some of its safe-haven gains from the previous day, with the dollar index, a gauge of its performance versus six major currencies, slipping around 0.5 percent.

Higher-yielding currencies recovered some of Monday's losses against the dollar, with sterling gaining 0.1 percent and the Australian dollar rising 1.1 percent.

For the quarter, the dollar index has risen 5.3 percent, its fourth straight quarter of gains.

Oil rose above $49 a barrel, getting a lift from rising stock markets and a weaker dollar.