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Markets rally on central banks' support

A trader looks at a glitch in the electronic display at the Philippine Stocks Exchange yesterday in Makati city, east of Manila. Shares on the 30-company PSE Index ended down 0.45 percent yesterday. PHOTO: AP

Some Asian markets rebounded yesterday, while European stocks rallied in early trading as central banks made new multi-billion dollar cash injections in a bid to steady global markets' fears of a credit crunch

The Nikkei 225, the benchmark for the Tokyo Stock Exchange, edged up 0.2 percent to 16,800.05, recouping Friday's drop as investors bought back into stocks with strong earnings.

Yutaka Miura, manager at Shinko Securities, said gains yesterday weren't expected to be very big, and most investors were waiting to see the US markets later in the day.

"This was mainly a technical rebound from Friday," he said.

South Korea's benchmark stock index stabilized following a 4.2 percent, or 80.19 point, decline on Friday, its third worst point drop ever.

The Korea Composite Stock Price Index rose 20.77 points, or 1.1 percent, to close at 1,849.26 yesterday. South Korea said that the impact from the US subprime loan crisis on the country was limited, and vowed to deal with any credit squeeze by adding cash to the financial system if needed. The country's banks and insurers have invested US$850 million in the US subprime mortgage loan sector, the finance ministry said.

In Tokyo, the Bank of Japan injected ?600 billion (US$5 billion) into money markets yesterday to try to bring more stability to the markets.

Malaysia's central bank said it was prepared to step in with funds to keep commercial banks lending to one another at normal rates, but it had no specific plans to do so.

Australia's interbank market showed no signs of stress, with the Reserve Bank of Australia (RBA) injecting A$1.52 billion (US$1.3 billion) as part of its daily money market operation yesterday, slightly less than average as there were still funds available from Friday's operation.

The European Central Bank (ECB), the US Federal Reserve and other central banks injected US$154 billion to their systems on Thursday and US$135.7 billion on Friday to cool a credit crunch.

Malaysia's central bank Governor Zeti Akhtar Aziz said yesterday that the region has "high levels of liquidity." Elsewhere in Asia, policy makers also insisted there is enough money in the banking system to warrant them staying out.

"Asia is still full of liquidity," said Tomo Kinoshita, chief Asian economist at Nomura Securities Co in Hong Kong. "It's not necessary for Asian central banks to have further accommodative monetary policy."

Some Asian share markets also made wary gains yesterday after the hammering they also took last week because of the worries over the US mortgage market.

Hong Kong share prices closed 0.45 percent higher as index heavyweight China Mobile gained on expectations that it will report strong first-half results this week.

Australia's benchmark S&P/ASX 200 index closed up 75.6 points or 1.3 percent at 6,011.6 while the broader All Ordinaries closed up 62.3 points or 1 percent at 6,027.5.

In Manila, shares fell 0.45 percent lower to close at 3,267.03 after rising early on bargain-hunting. Stocks in Jakarta and Singapore were also lower. New Zealand shares closed down 0.97 percent.

In Europe, London's FTSE 100 stood 1.39 percent higher at 6,122.10 points shortly after the opening. In Frankfurt the DAX 30 gained 0.95 percent to 7,413.30 points and the Paris CAC 40 climbed 1.19 percent to 5,513.67. The DJ Euro Stoxx 50 index of top eurozone shares advanced 1.06 percent to 4,205.95 points in early trade.

The ECB said the eurozone banking market was returning to normal. However, it injected 47.67 billion euros (US$65.2 billion) into the euro-zone money markets in a one-day tender yesterday to replace Friday's special three-day tender for 61.05 billion euros.

The Federal Reserve yesterday pumped US$2 billion into the US financial system just after the stock market opened, the Federal Reserve Bank of New York said.

In a statement before the financial markets opened yesterday, the New York Fed said that it "stands ready to conduct additional operations later in the day as needed."
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