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US optimism infects Asian investors

Asian stock markets rebounded yesterday as investors cheered an overnight rally on Wall Street and snapped up beaten down shares on expectations of a US interest rate cut later this week.

Japan's benchmark Nikkei 225 index was up 3 percent at 13,486.5 in afternoon trading, while Hong Kong's blue-chip Hang Seng Index rose 2.3 percent to 24,597.63 by midday.

Both markets -- Asia's two biggest -- tumbled more than 4 percent on Monday on fears the US economy, a major export destination, was entering a recession. Stocks in India, Thailand, Indonesia and the Philippines also rose.

Monday's sell-off gave investors a chance to re-enter the market, said Francis Lun (藺常念), a general manager at Fulbright Securities (富昌證券) in Hong Kong.

"Hong Kong's rally is really making up for yesterday's fall," he said. "The market was oversold."

Sentiment got a lift from Wall Street's gain on Monday, when investors in the US took a dismal new home sales report as a sign the Federal Reserve will lower interest rates when its policy-making committee was scheduled to meet yesterday and today.

That would come right on the heels of a deep three-quarters of a percent cut in a key rate on Tuesday last week to 3.5 percent that sparked a rebound in stock markets worldwide after they plunged early in the week.

Investors speculate this week's interest rate cut will be either a quarter point or half point.

"If they don't cut rates, then we will probably see the markets fall again on Thursday," Lun said.

Lun said Asian investors were also heartened by US President George W. Bush's final state of the union address on Monday, in which he stressed the government's determination to reinvigorate the moribund economy with tax rebates.

The Dow Jones industrial average rose 176.72, or 1.45 percent, on Monday to 12,383.89, while the Standard & Poor's 500 index rose 23.36, or 1.76 percent, to 1,353.97.

Many Asian countries are heavily reliant on US consumers to buy their exports, and stock markets across the region have reacted sharply to grim economic data from the US over the last few weeks, pointing to a recession in the world's biggest economy.

In Hong Kong, gainers included export-related stocks such as Li & Fung (利豐), which jumped 4.4 percent. Clothing maker Esprit Holdings was up 4.1 percent.

China coal stocks listed in Hong Kong were also "hot," said Lun, on expectations that the prolonged and unexpectedly severe winter across China will drive demand for more coal.

China Coal (中煤) ended the morning session up 3.3 percent while China Shenhua (中國神華) was up 3.4 percent.
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