Asian stocks surged on Tuesday after world governments threw lifelines to ailing banks in a bid to end the worst financial crisis since the Great Depression.
Investors cheered the latest steps by world leaders to unlock frozen credit markets, driving the Dow to its biggest gain in 75 years overnight.
Tokyo’s Nikkei index soared 13% by lunch, one of its biggest ever gains, as the Japanese government unveiled market-stabilising measures including an easing of restrictions on company share buy-backs.
Stocks also soared in Hong Kong, Sydney and Seoul after European governments pumped billions of dollars into their credit-starved banks and Washington said it would buy stakes in an array of financial firms.
“The markets had been saying it was necessary to inject public funds into troubled financial institutions, and countries have moved to do that,” said Kazuhiro Takahashi, equity chief at Daiwa Securities SMBC.
It was a spectacular turnaround for the Nikkei, which plunged 9,62% on Friday, the biggest loss in two decades, capping its worst week ever. Japanese markets were closed on Monday.
The surge came after Wall Street’s Dow Jones index jumped 11,08% Monday, snapping an eight-session losing streak.
It was the Dow’s biggest points gain on record and its sharpest percentage rise since 1933 during the Great Depression.
“Sharp stocks market gains were in response to the latest bold measures from the major economies to shore up banks, unfreeze credit markets and boost liquidity in money markets,” said NAB Capital strategist John Kyriakopoulos.
‘Phenomenal gains’
Meanwhile, Sydney was up 3,7 %, Seoul was ahead 5,1% and Hong Kong had gained 4,4% by the midday break.
“We’ve seen phenomenal gains,” said Adrian Leppinus of Cameron Securities in Australia. “There’s been a mad rush for people to get back in.”
The roots of the financial crisis date to last year, when problems emerged with so-called subprime mortgages on the United States, and the world’s markets are still sharply down since the beginning of the year.
Japan and Hong Kong are off 39% in 2008, South Korea is down 29% and Australia has lost 32%.
US President George Bush and Treasury Secretary Henry Paulson were both due to make statements later in the day on action to shore up public confidence following the market turmoil.
Neel Kashkari, the newly appointed Treasury Department official tasked with managing the $700-billion US rescue package, on Monday revealed plans for the US government to buy stakes in several banks.
European leaders unlocked more than €1-trillion in rescue funds for the troubled banking sector, pledging to plough capital into the hardest-hit banks and massively underwrite loans between financial players.
In Australia, Prime Minister Kevin Rudd unveiled an economic stimulus package worth US$7,25-billion, warning the financial crisis was threatening economic growth and jobs. — AFP