Asian stock markets surge after Fed rate cut
Thursday, October 30, 2008; 1:23 AM
HONG KONG -- Asian stock markets rallied Thursday, led by a 12 percent jump in South Korea, after the U.S. Federal Reserve slashed interest rates to help revive the world's largest economy and opened new credit lines with central banks.
Every major index advanced, with Japan's Nikkei 225 stock average gaining 8.4 percent to 8,897.19 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.
Hong Kong's Hang Seng Index shot up 10.11 percent to 13,986.02, while South Korea's key stock index soared 12.7 percent to 1,092.09. Benchmarks in Australia, Singapore and Taiwan and the Philippines were trading higher by 4 percent or more. Russia's two main indices were also up sharply.
The Federal Reserve's overnight move to cut a key interest rate by half a percentage point was widely expected but still provided a reason to sustain the regional rise that began Tuesday following days of punishing declines. Hong Kong's de facto central bank followed by cutting its key lending by the same; Taiwan reduced its own by a quarter point.
Before the Fed's move, China also cut its key rates by just over a quarter point. The Shanghai Composite index was up 2.2 percent.
Markets also took heart from an announcement that the Fed would temporarily supply new lines of credit worth up to $30 billion to the central banks of South Korea, Brazil, Mexico and Singapore to help relieve the global credit crisis.
"This does help investor confidence," said Lorraine Tan, director at Standard & Poor's equity research in Singapore. "Globally, governments are just doing what they can to make sure the economy doesn't seem even worse. Plus I think investors are waking up to the fact that valuations are ridiculously low," she said.
The $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 U.S. dollars.
Oil continued to strengthen. Light, sweet crude for December delivery climbed another $2.22 to $69.72 a barrel in Asian trade on the New York Mercantile Exchange. The contract settled at $67.50 overnight.
In currencies, the dollar rose to 98.36 yen from 97.59 late New York Wednesday and up sharply from 91 yen last Friday.
Investors seemed to shrug off Wall Street's mixed finish. The Dow Jones industrial average closed down 74.16, or 0.82 percent, at 8,990.96. The S&P 500 index fell 10.42, or 1.11 percent, to 930.09, but the Nasdaq closed higher.
In Japan, Toyota Motor Corp. was up 10.3 percent, while Sony Corp. was up 8.1 percent.
South Korea's battered financials powered higher after the Fed's moves. KB Financial Group Inc., the holding company for top South Korean lender Kookmin Bank, soared 10. 5 percent.
In Australia, resource giant BHP Billiton Ltd. gained 9.2 percent on the bank of rising commodities prices. Chinese upstream oil producer CNOOC Ltd. rocketed 17.8 percent.
The Fed's actions appeared to help loosen lending among the region's banks. Hong Kong's interbank offered rate, also known as Hibor, for three-month loans slid to 3.39 percent from 3.54 percent.
Markets in India were closed for a public holiday.
AP Business Writer Kelly Olsen contributed to this report from Seoul.