Relieved investors stormed back into global markets yesterday, sending stock indexes in Hong Kong, South Korea and Japan surging by double digits, after the US Federal Reserve slashed interest rates to help revive the world’s largest economy and opened new credit lines with central banks.
Hong Kong’s Hang Seng Index led the charge in Asia, shooting up 12.8 percent to 14,329.85, and South Korea’s key stock index soared a record 12 percent to 1,084.72.
Japan’s Nikkei 225 stock average gained 10 percent to 9,029.76 as exporters like Toyota and Sony got a boost from the yen continuing to retreat from a 13-year high against the dollar last week.
Benchmarks in Australia, Singapore, Taiwan and the Philippines added 4 percent or more. Russia’s two main indexes were also up sharply.
The markets were primed for an explosive move after plunging in recent weeks.
“This is panic buying after panic selling,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong.
Wall Street futures said US markets were poised to open higher. Dow Jones industrial average futures were up more than 2 percent.
As trading opened in Europe, stocks in Britain, France and Germany were moderately higher.
The Federal Reserve’s overnight move to cut its key interest rate by half a percentage point was widely expected but still provided a reason to sustain the regional rise that began on Tuesday following days of punishing declines.
Hong Kong’s de facto central bank followed by cutting its key lending by the same amount as the Fed and Taiwan reduced its key interest rate by a quarter point. In Japan, speculation mounted that the central bank would cut its key rate, already at a low 0.5 percent, at a meeting today.
Before the Fed acted, China also lowered its rates by just over a quarter point. The Shanghai Composite index was up 2.9 percent.
Markets also took heart from an announcement that the Fed would temporarily supply new lines of credit worth up to US$30 billion to the central banks of South Korea, Brazil, Mexico and Singapore to help relieve the global credit crisis.
“You’re seeing some pretty aggressive action by the central banks. That’s giving people confidence and obviously these markets are very oversold,” said Tim Rocks, Asia strategist at Macquarie Securities in Hong Kong. “We’ve seen some genuine buying … for the first time investors willing to pick up some of the outrageous bargains out there.”
The US$30 billion facility is the latest in a series of swap arrangements where the Fed provides dollars for reserves of the other nations’ currencies.
The Fed said the new credit lines were designed “to help improve liquidity conditions in global financial markets” by increasing the global availability of US dollars. The move appeared to help loosen lending among the region’s banks.
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