Asian shares were mostly higher yesterday, with Hong Kong and South Korea’s benchmarks up more than 3 percent amid reports the US government might expand its stake in troubled banking giant Citigroup to ease the financial crisis.
Worries that major Western banks, crippled by growing losses from bad assets, might have to be nationalized sent markets sharply lower last week.
But investors seemed relieved to have some clarity about the fate of Citigroup Inc, which is said to be in talks with authorities to increase the US government’s stake in the teetering lender to as much as 40 percent.
Should the US end up taking greater ownership, however, the move could help restore confidence by finally bringing a measure of stability to the hard hit financial sector, analysts said. That in turn could boost chances for a recovery in the world economy.
“People are taking it as a positive sign,” said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong. “It shows the government will not allow a major bank to fail again.”
“They’ve learned their lesson with Lehman Brothers that the ramifications are so great, sometimes no amount of money can rebuild confidence,” he said.
Hong Kong’s Hang Seng rose 404.58, or 3.2 percent, to 13,103.75 and South Korea’s KOSPI was up 33.60, or 3.2 percent, at 1,099.55.
In China, the Shanghai benchmark added 2 percent.
Markets in Taiwan, Singapore and the Philippines also edged higher.
In Japan, the NIKKEI 225 stock average recouped some of its losses to be down just 40.22 points, 0.5 percent, to 7,376.16 as the yen strengthened against the dollar. Australian shares also fell.
US futures were higher on the Citigroup report, suggesting Wall Street would recover at the open. Dow futures rose 95 points, or 1.3 percent, to 7,447 and S&P500 futures were up 9.8 points, or 1.3 percent, at 779.30.
Citigroup and other banking heavyweights in the US, Britain and other countries have already received hundreds of dollars in government aid in hopes of saving the financial system from collapse.
While providing a short-term of jolt of optimism, the measures have failed to put to rest fears that more institutions could follow in the footsteps of Lehman Brothers without governments assuming full or partial ownership.
Earlier this month, US President Barack Obama’s financial rescue plans met with a lukewarm reception from investors concerned the measures were vague or did not go far enough to recapitalize the banks. This week, investors are expecting details on Obama’s financial bailout program.
On Friday, continuing financial and economic worries sent the Dow industrials down 100.28 points, or 1.3 percent, to 7,365.67 On Thursday, the Dow broke through its Nov. 20 low of 7,552.29, and closed at its lowest level since Oct. 9, 2002.
The Standard & Poor’s 500 index on Friday fell 8.89, or 1.14 percent, to 770.05.
Oil prices were modestly higher in Asian trade, with light, sweet crude for April delivery up US$0.58 at US$40.61 a barrel. The contract edged down 15 cents to settle at US$40.03 on Friday.