SINGAPORE (Bloomberg) -- Asian stocks climbed, led by Hong Kong's biggest advance in 10 months after China's government said it will let banks buy shares outside the mainland for the first time.

China Mobile Ltd. and Jiangxi Copper Co. paced gains on speculation Chinese companies whose shares trade in Hong Kong will benefit from the rule change. All 10 industry groups on the Morgan Stanley Capital International Asia-Pacific Index advanced. “This is all part of the positive China story,” Geoff Lewis, head of investment services at JF Asset Management Ltd. in Hong Kong, which manages $88 billion in Asia. “Good sentiment towards China is good for Hong Kong also. The two markets are becoming more and more interlinked.”

Toyota Motor Corp. jumped by the most in two months, leading gains among exporters after a report showed easing U.S. inflation, raising expectations the Federal Reserve will cut interest rates. BHP Billiton Ltd., the world's largest mining company, rose along with the prices of copper and zinc.

The MSCI Index added 0.9 percent to 149.82 in Tokyo, ending a two-day, 1.1 percent slide. Hong Kong's Hang Seng Index surged 2.5 percent to a high, its largest gain since June 30, as shares worth HK$95 billion ($12.2 billion) changed hands, a record.

Benchmarks also reached new highs in China, South Korea and Singapore, and gained elsewhere, except in Taiwan, Pakistan and Sri Lanka. Japan's Nikkei 225 Stock Average added 0.7 percent to 17,677.94. Markets were close in the Philippines for mid-term elections.

U.S. stocks rose on May 11, enabling the Dow Jones Industrial Average and Standard & Poor's 500 Index to jump the most this month. ---------------------- Beneficiaries

China Mobile, the world's largest mobile-phone operator by users, gained four percent to HK$73.75. Jiangxi Copper, China's largest publicly traded producer of the metal, surged 19 percent to HK$13.44. China Life Insurance Co., the biggest insurer, climbed 5.9 percent to HK$26.05.

Commercial banks can invest as much as 50 percent of funds in the qualified domestic institutional investors program, or QDII, in overseas stock markets, the China Banking Regulatory Commission said on May 11. Investors need at least 300,000 yuan ($39,000) to buy such financial products, the regulator said.

Banks based in China have been approved to invest a total of $13.9 billion overseas, according to the regulator. This implies a maximum of about $7 billion is available for investment in overseas stocks. The market capitalization of Hong Kong's stock market is about $1.86 trillion.

China shares are Asia's best performers this year, after an 83 percent jump in the CSI 300 Index. The market is also the most expensive in the region, with the benchmark valued at about 42 times earnings. ------------------- Opportunities

Meanwhile, the Hang Seng China Enterprises Index, which tracks the so-called H shares of 41 mainland companies, has added 5.9 percent, following a 5.4 percent rise Monday. It's valued at about 20 times earnings.

“The move will create arbitrage opportunities by allowing mainland investors to buy cheaper H shares,” said Thue Isen, who helps manage $1 billion in Asian equities at Bankinvest Group in Singapore.

China Petroleum & Chemical Corp., the nation's largest oil refiner also known as Sinopec, rose 10 percent to HK$8.07. The stock was trading at 12.84 yuan (HK$13.07) in Shanghai, where it gained 1.4 percent.

The changes to the QDII program may help Chinese stocks listed in Hong Kong narrow a valuation gap with their mainland counterparts, caused by controls on China's citizens investing outside the mainland, including Hong Kong.

Toyota, the world's largest automaker by market value, added 2.4 percent to 7,320 yen, the most since March 6. AU Optronics Corp., the third-biggest maker of liquid-crystal displays, rose 1 percent to NT$51.70. ------------------------- Rate cut?

U.S. producer prices excluding food and fuel costs were unchanged for a second month in April, government reports showed on May 11. Federal Reserve policymakers on May 9 left their benchmark lending rate at 5.25 percent and said rising prices remain the main risk.

“The numbers suggest inflation might be tapering and raises the possibility the Fed may cut rates, which would lower borrowing costs,” said James Chua, who helps manage about $200 million at Phillip Capital Management in Singapore. Lower borrowing costs would leave more money to be spent on goods and services. Nissan Motor Co., Japan's third-largest automaker by sales, surged 4.5 percent to 1,291 yen. Nissan also advanced after Nomura Securities Co. raised its rating to “buy” from “neutral.” ----------------------- BHP, Rio

BHP, the world's largest mining company, climbed 0.9 percent to A$31.28. Rio Tinto Group, the third biggest, rose 0.9 percent to A$92.82. Korea Zinc Co., the world's second-biggest smelter of the metal, gained 0.3 percent to 156,500 won.

A measure of six metals traded on the London Metal Exchange, including copper and zinc, rose 0.7 percent on May 11.

“The resources shares are always among the favorites, and those companies that can justify their share prices because of earnings,” said Jamie Spiteri, head dealer at Shaw Stockbroking Ltd. in Sydney.

Kookmin Bank, South Korea's biggest bank, gained 2.2 percent to 84,000 won. Woori Investment & Securities Co. lifted its recommendation on Kookmin to “buy” from “hold,” in a report today, citing cheap valuations.

Woori's 12-month share-price estimate on the stock was raised by 7.8 percent to 95,500 won. The price is low enough for investors to try a “buy and hold” approach, wrote Daniel Baek, an analyst.

Shinhan Financial Group Ltd., South Korea's second-largest lender, advanced 2.1 percent to 54,500 won. ---------------------- Earnings

Tokyo Electron Ltd., the world's second-largest supplier of chip-making equipment, jumped 5.3 percent to 8,690 yen. Net income will probably rise 14 percent to 104 billion yen ($865 million) in the year ending March 2008, the company said May 11, on demand for memory chips used in computers and handsets. Sales may gain 5.6 percent to 900 billion yen. The forecasts beat average estimates compiled by Bloomberg News.