Picture : Elderly Investors Monitoring Stock Markets Outside a Local Bank in HKTOKYO - Asian stock markets made a cautious rebound Thursday as investors kept an eye on US Federal Reserve moves to combat housing woes that have battered global bourses.
Asian markets were in positive territory after a strong recovery on Wall Street overnight but early gains were pared in Tokyo and some other bourses as dealers looked to a speech Friday by Fed chairman Ben Bernanke.
Hong Kong was among the top regional performers, closing up 2.0 percent on hopes for interest rate cuts both in the United States and locally.
"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 Federal Reserve pumped more money into the market and 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.
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 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.
Tokyo closed up 0.88 percent, losing some of its momentum on a modest appreciation of the yen, which makes Japanese exports less competitive.
In times of financial crisis, many players seeking to contain the damage unload the yen, 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.
"Share prices turned top-heavy as investors thought the rebound on Wall Street was within the range of the recent volatility," said Mitsushige Akino, chief fund manager at Ichiyoshi Management.
"Investors were sceptical whether US shares will be able to maintain the gains," he added.
In Hong Kong, the gains were led by interest rate speculation and also expectations Beijing will allow individual investors in Hong Kong to expand investments into mainland China.
"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, closed up 1.14 percent, 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 closed 1.48 percent higher, Sydney was up 0.6 percent, Seoul rose 0.9 percent, Mumbai was up 0.86 percent and Jakarta ended 0.7 percent higher.
But Singapore share prices closed 0.41 percent lower and Bangkok ended 0.06 percent lower. - AFP/ir
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