* Bank stocks rally for second day, Japan tech sector climbs

* Political risks flare up in India, Thailand * Oil slips below $54, with demand uncertain

HONG KONG - ASIA stocks rose for a fifth day on Thursday, helped by hopes that policymakers' efforts will ultimately prevail after a surprise and aggressive rate cut from China, though US data ominously reflected a deep recession.

While investors cheered China's policy moves, views on India, emerging Asia's other titan, darkened after militants killed at least 86 peple in the financial capital Mumbai.

India's stock markets were shut for the day following the attacks.

Oil prices shrugged off the rise in Asian equities and fell more than US$1 (S$1.51) near US$53 a barrel as investors shifted their focus back to distressed demand, after US government data showed a sharp buildup in crude stocks.

Two different camps of investors were emerging as the end of a wild, volatile year for markets approaches. One group believes global equity prices have already discounted a global recession and now there is value to be found in some beaten down sectors, like financials and consumer goods companies.

The other pack thinks the boost from trillions of dollars of government stimulus and aggressive central bank moves - like China's surprising 1.08 percentage point cut in interest rates - will help down the line but the near-term drag from shrinking economies in Europe, Japan and the United States is inescapable.

'China's rate cuts only help to some extent for the Asian risk environment because the key ingredient that's driving the gloomy outlook is actual demand, especially from advanced economies,' said Mr Suan Teck Kin, an economist with United Overseas Bank in Singapore.

'These would help spur some investment and spending activities and support the fiscal initiatives but the main driver would still be from actual spending.'

Stocks in the Asia-Pacific region outside of Japan were up 2.7 per cent, set for a fifth straight day of gains, according to an MSCI index Still the index is on track for a seventh month of declines, down about 9 percent in November.

Hong Kong's Hang Seng index rose 2.9 per cent, while Shanghai's composite index rose 4.7 per cent.

Bank stocks benefited from a drop in reserve requirements, with shares of China's biggest bank, Industrial and Commercial Bank of China, up 4 per cent.

In Japan, the Nikkei share average climbed 2.4 per cent, supported by a rally in the technology sector, which globally has been a hard-hit because of its dependence of business and consumer spending.

US markets were closed on Thursday for a public holiday, but investors would undoubtedly be on the lookout for retail sales figures for the day after Thanksgiving on Friday.

That is traditionally the busiest time for retailers but desultory economic conditions may encourage consumers to temper spending.

Political risks build

The last few days have seen a buildup in political risks in Asia, especially after the attacks in India and anti-government protestors in Thailand blockaded an airport in Bangkok.

Thai stocks were down 1.6 per cent as protests in Bangkok threatened to escalate into widespread civil unrest after the country's prime minister refused to step down.

The cost of protection against sovereign debt default in Thailand and indications of heightened aversion to risk rose in India, adding to uncertainty when investors crave for stability with focus still on the economic impact of the financial crisis.

'Clearly, it will be negative for the sentiment towards India at this point of time, the time when the world is already looking to be highly uncertain in terms of its growth prospects,' said Mr Joseph Tan, Asia chief economist with Credit Suisse in Singapore, referring to the attacks in Mumbai.

'This will be negative for the rupee versus the dollar, but again I want to stress that the impact will be short-lived.'

The US dollar steadied against the euro after rising on Wednesday on a string of weak US economic data that accelerated safe-haven flows into the world's foremost reserve currency.

US consumer spending in October posted its biggest drop in more than seven years, and consumer confidence fell to a 28-year low in November, further darkening the economic outlook.

The euro rose 0.1 per cent to US$1.2900 after falling as low as $1.2819 on Wednesday, partly on pessimistic views about the impact of a 200 billion euro European stimulus plan.

The dollar fell 0.3 percent to 95.48 yen (S$1.51) having rebounded from Wednesday's low of 94.60 yen.

US crude futures fell towards US$53 a barrel on Thursday, as investors fretted over falling oil demand, erasing some of the previous day's sharp gains. -- REUTERS