* MSCI Asia ex-Japan adds 0.7 pct, Chinese shares outperform
* Nikkei falls amid end-quarter adjustments, China worry
* Euro, Aussie, and commodities drift higher as dollar
* Spain's economic reform and budget soothe sentiment
* European shares likely advance
By Chikako Mogi
TOKYO, Sept 28 Asian shares outside Japan rose
on Friday on optimism economic reform and budget plans unveiled
by Spain will help the debt-saddled nation manage its debt
imbalances, potentially pre-empting the likely conditions of
Riskier currencies such as the Australian dollar, the euro
and commodities also edged higher while the dollar remained
defensive, with investors cautiously warming up to risk as
Spain's latest steps could activate the European Central Bank's
bond-buying plan aimed at capping Madrid's high borrowing costs.
Sentiment was buoyed by Spain's announcement on Thursday of
a detailed timetable for economic reform and a budget based
mostly on sharp spending cuts rather than tax hikes, as Madrid
continues to talk with European Union authorities about the
terms of a possible aid package.
"It's a move in the right direction because at the very
least they have to meet the conditions for the ECB to buy their
bonds," said Tetsuro Ii, CEO of Commons Asset Management.
A marginal rise in U.S. stock futures hinted at a
steady start on Wall Street, and financial spreadbetters expect
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX to open as much as 0.7 percent higher.
The MSCI index of Asia-Pacific shares outside Japan
rose 0.7 percent, led by the outperformance in
Chinese shares, and was set for a quarterly gain of 8.5 percent.
Hong Kong shares rose 0.3 percent and Shanghai
jumped 1 percent on hopes China will take measures over
the coming long holiday or ahead of the expected leadership
transition as early as next month to boost the economy and
support domestic stock markets.
The yen hit a two-week high against the dollar of around
77.50 yen on Friday. The dollar index measured
against a basket of currencies eased 0.2 percent after losing
0.4 percent on Thursday for its biggest daily drop in two weeks.
The euro rose 0.2 percent to $1.2934, rebounding from
a two-week low of $1.2828 touched on Thursday, and the
Australian dollar, widely seen as a gauge for investor
risk appetite, rose 0.3 percent to $1.0466.
Asian credit markets firmed, narrowing the spread on the
iTraxx Asia ex-Japan investment-grade index by
three basis points.
SPAIN VS CHINA
While Spain's latest move and speculation for Chinese
stimulus supported market sentiment on Friday, they also
represented vulnerability in the efforts to resolve the euro
zone debt crisis and the global economies hit by Europe's woes.
Reflecting choppy market sentiment, the CBOE Volatility
index which measures volatility expected in the Standard
& Poor's 500 index fell 11.7 percent on Thursday fo r its
sharpest daily decline in three weeks, just a day after the
index posted its biggest daily rise in 2-1/2 weeks.
"The budget represents two steps forward and one step back,
which is why the euro only moved slightly higher," said Mary
Nicola, a strategist at BNP Paribas.
Later on Friday, a stress test of Spain's banking sector
will be released, which will reveal how much more money is
needed to recapitalise its banks. Moody's latest credit rating
review is also expected this week.
Shares in Australia, heavily reliant on resources
demand from China, inched up 0.2 percent, but were capped on
concerns over the economic weakness in the world's
second-largest economy, with Fitch Ratings cutting its 2012
growth forecast for China from 8 percent to 7.8 percent on
"There are a lot of people out there who are very concerned
about whether or not the stimulus in China is real or coming
through," said Damien Boey, an equity strategist at Credit
Japan's Nikkei stock average bucked the rest of Asia
and slumped 1 percent amid concerns about falling revenues for
local companies in China, hit by recent anti-Japan protests.
Following fresh monetary stimulus unveiled by the United
States and Japan this month, markets have retained expectations
for China to cut interest rates to spur growth, as weakening
demand in China has damaged global economies and weighed on
Data on Friday showed Japan's industrial output fell more
than expected in August as the world's third-largest economy was
held back by a strong yen, the euro zone debt crisis and a
slowdown in its top export market China.
Thailand, Southeast Asia's second-largest economy, also saw
factory output in August falling a bigger-than expected 11.32
percent from a year earlier as faltering global demand weighed,
raising the chances for an interest rate cut.
Beijing approved about $150 billion-worth of infrastructure
projects this month.
But China's biggest listed steelmaker, Baoshan Iron & Steel
Co expressed doubt that attempts to prop up the
slowing economy would revive demand in the world's biggest
market for the metal. A slump in iron ore prices had triggered a
broad sell-off in riskier assets.
Brent crude futures rose 0.3 percent to 112.36 a
barrel, as Spain eased investor worries about Europe's fiscal
crisis and revived hopes of a recovery in oil demand growth.
Worries about supplies from the Middle East also provided
support. U.S. crude was up 0.5 percent to $92.32.