TOKYO: Asian stock markets rebounded in early trade Thursday as investors grew confident that the Federal Reserve would take action to combat housing woes that have battered global bourses. Asian markets all opened in positive territory, with Hong Kong jumping by more than two per cent, after a strong recovery overnight on Wall Street.
The Federal Reserve pumped more money into the market and Fed chairman Ben Bernanke told a senator the central bank was "prepared to act as needed," raising hopes that the Fed will cut its key rate when it meets next month.
"Asian shares are following Wall Street and recovered due to renewed sense that the Fed will solve this crisis," said Toshihiro Matsuno, equities research head at SMBC Friend Securities in Tokyo.
"Volatility remains but I think the volatility will start calming down. It will move in waves, with periods of volatility followed by relative calm," he said.
The problems in the US mortgage market erupted due to "sub-prime" home borrowers with shaky credit histories defaulting on their loans. Investors then rushed to cover their losses, triggering fears of a liquidity squeeze.
The Federal Reserve on Wednesday pumped 5.25 billion US dollars more into the banking system, the third consecutive daily injection this week aimed at easing the credit squeeze.
"The sub-prime problem will continue for a long time. But the world economy will start looking at it as a US problem and that it won't hurt the overall economy," Matsuno said.
In Tokyo, share prices also benefitted from a stabilising yen.
In times of financial crisis, many players seeking to contain the damage will unwind their yen positions, which they had borrowed because of Japan's super-low interest rates to invest in higher-yielding markets.
The dumping of the so-called "carry trades" leads to a spike in the yen, making Japanese exports less competitive overseas.
The Tokyo Stock Exchange's benchmark Nikkei-225 index was up close to one per cent in early afternoon trade.
In Hong Kong, the Hang Seng index was up more than two per cent.
"The sell-off in the last two days was quite high. Some investors may go on bargain hunting today," said Kenny Tang, associate director at Tung Tai Securities.
The Shanghai market, which has been less exposed than most to the sub-prime problems, was up nearly one per cent, in part due to the rub-off effect of Hong Kong.
"Excluding China, Asian shares followed developments on Wall Street. Shares recovered because of heightened expectations that the Fed will lower its fed funds rate," said Hirokazu Fujiki, equity strategist at Okasan Securities in Tokyo.
He said that the market was now waiting for clues when Bernanke delivers a speech Friday at the Fed's annual symposium in Jackson Hole, Wyoming.
"I think Bernanke's awareness of the problem has heightened," Fujiki said.
Among other markets, Taipei was up 1.60 per cent, Sydney was up 0.74 per cent and Seoul was up 0.88 per cent. Both Singapore and Jakarta were up nearly one per cent. - AFP/ac
No comments:
Post a Comment