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Japan's Nikkei posts record 14% rise

(Agencies)
Updated: 2008-10-14 15:11

Asian markets soared for a second day Tuesday, led by a stunning 14 percent jump in Tokyo, after Wall Street rallied from its worst week ever on optimism that government rescue efforts will heal the crippled global financial system.

Tokyo Stock Exchange workers smile as they watch a stock price board shortly after the opening bell of Tuesday's trading at the exchange in Tokyo on October 14, 2008. [Agencies]

Japan's benchmark Nikkei 225 index surged 1,171.14 points, or 14.15 percent, to close at 9,447.57 -- a stunning reversal after plunging nearly 10 percent Friday and its biggest single-day gain in history. The Japanese financial markets were playing catch-up because they were closed Monday for a holiday.

In Australia, the S&P/ASX200 index traded 3.7 percent higher as the government announced a plan to inject 10.4 billion Australian dollars ($7.4 billion) to strengthen the country's economy.

Hong Kong's key index gained 3.4 percent, while South Korea's market jumped over 6 percent. The Philippine market surged more than 7 percent and Indonesia's market -- shut half of last week due to dramatic declines -- was up more than 6 percent.

Japanese bank Mitsubishi UFJ Financial Group Inc. added more than 14 percent after completing a US$9 billion deal for a 21 percent stake in US investment bank Morgan Stanley.

The Asian advance came after the Dow Jones industrial average gained more than 11 percent -- its biggest one-day gain since 1933 -- in a huge overnight rally as traders reacted with relief to efforts by the US government to inject capital into banks and get lending flowing again.

Late Monday in the US, government officials and industry executives said the Bush administration will use $250 billion of the $700 billion bailout program recently passed by Congress to buy into American banks. The government initially will buy stock of nine large banks, but the program is expected to be expanded to many others.

The indicator board at the Australian Securities Exchange (ASX) in Sydney shows a steep climb in shares on October 14, 2008. Australian shares jumped 5.5 percent on Tuesday, with sharp gains across the board, tracking hefty gains in Wall Street stocks and base metals prices as investors cheered international moves to shore up banks. [Agencies]

That followed signals that European governments were putting up nearly US$2 trillion to safeguard their own banks.

"The governments are ensuring that no matter what happens they're not going to allow another major institution to fail," said Nicole Sze, an investment analyst at asset manager Bank Julius Baer & Co. in Singapore. "What's happened in the last 48 hours is an extremely positive development. ... You're seeing a reversal of the panic selling, and we think a temporary bottom has been found."

As part of the Japanese measures to strengthen its own financial system, authorities on Tuesday relaxed regulations on companies buying up their own shares, a change that will help prevent takeovers and allow companies to prevent a nose-dive in their own issues.

Japan also promised to continue to protect people's insurance policies and savings accounts, and said it will consider capital injection into medium-size and small Japanese financial institutions.

Stocks across Asia rocketed higher Monday after going into a tailspin last week amid growing worries that the financial crisis would pull the global economy into recession.

While those concerns still linger, investors were encouraged that governments appeared to be taking steps to tackle one of the core problems -- helping to revive bank-to-bank lending, which has almost ground to halt because of fears about repayment due to enormous losses from souring mortage-linked debt.

Lending rates softened somewhat Tuesday in Asia but remained elevated despite the coordinated global interest rate reductions and massive liquidity boosts of lateseas Bank in Singapore. "Obviously the banks are still reluctant to lend ... it's going to take some time for these measures to take place."

On Monday, the London interbank offered rate, or Libor, for three-month dollar loans fell 0.07 percent to 4.75 percent.

Oil continued to rise, with light sweet crude for November delivery gaining $2.07 to $83.26 a barrel in Asian trade on the New York Mercantile Exchange. The contract added US$3.49 to settle at US$81.19 overnight.

In currencies, the dollar slid against the yen to 102.2.