Asian stock markets rise sharply

September 22, 2008

, SYDNEY, September 22 – Asian share prices soared in early trade Monday as the US government\’s massive rescue plan for the battered financial sector encouraged investors shaken by last week\’s global turmoil.

Japanese shares were up 1.98 percent in morning trade and Australia\’s market jumped 3.5 percent, with financial stocks leading the charge. New Zealand rose 2.47 percent by mid-afternoon.

Chinese prices opened up more than eight percent, Hong Kong rose 2.8 percent, Singapore was up 1.03 percent and South Korea\’s KOSPI index gained 1.62 percent.

Spurring the rally, along with domestic developments in some countries, was the move by the US Treasury to ask Congress for authority to spend 700 billion dollars to buy bad mortgage-related assets from financial institutions.

Wall Street shot up 3.35 percent Friday on news of the rescue plan, capping one of the most tumultuous weeks in history for global financial markets.

In Japan, Credit Suisse chief economist Hiromichi Shirakawa said the financial crisis was now winding up.

"The creation of a 700-billion-dollar \’garbage-bin fund\’ has risks that government intervention could become a bit too excessive but would have great effects on ending the financial turmoil," he said in a report.

"It is highly possible that US share prices have hit bottom," he said. "For a full-fledged recovery of share prices it is necessary that a highly effective garbage-bin fund will swing into action but this will be a matter of time."

JP Morgan analysts said: "Speculation continues to dominate market dynamics where extreme fear drives selling, only to be punctuated by violent rallies responding to the relief of policy actions.

"The speed with which policymakers in the US have moved offers hope that the risks to the financial system may now be genuinely fading," the analysts were quoted as saying by Dow Jones Newswires.

In Australia, the market opening was delayed by an hour so that new regulations banning all forms of short-selling in companies listed on the local stock exchange could be clarified for investors.

The move by the Australian Securities and Investments Commission (ASIC) follows a similar crackdown in the US and some European markets as regulators act to protect troubled financial services sectors.

Short-selling occurs when investors sell shares they do not yet own in order to profit later from an anticipated fall in prices — often contributing to the price fall.

Australian Treasurer Wayne Swan said the ASIC had made a "wise decision."

"We\’re not out of the woods and we\’re not immune from all these events," he said, but noted that there were underlying strengths in the Australian economy.

"We do have a strong budget surplus. We do have high terms of trade, we do have strong business investment."

As the market got into gear after the delayed opening, financial stocks gained strongly, supported by the big miners that benefited from higher metal prices, dealers said.

"We\’re seeing buying on the financials on the news of this (US) rescue package, while the resources sector is stronger on higher metals prices overnight," CMC Markets senior dealer Dominic Vaughan said.

China\’s steep rise on opening came after its securities regulator said Sunday it plans to waive a rule requiring listed companies to seek approval from regulators before buying back their shares on the open market.

Analysts said the proposed rule has more of a psychological than practical impact.

"There\’s no doubt, however, that the proposed rule demonstrates Beijing\’s support for China\’s stock markets," Huatai Securities analyst Chen Jinren said.

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