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TOKYO: Asian stocks surged Tuesday, with Tokyo posting its biggest-ever gain as governments threw lifelines to ailing banks in a bid to end the worst financial crisis in half a century.
The emergency steps sparked hopes of an easing of the credit market gridlock that has shaken confidence in the international financial system and sparked fears of a global recession, dealers said.
Tokyo's Nikkei index soared a record 14.15 per cent as Japan unveiled market-stabilising measures including a relaxation of restrictions on corporate share buybacks.
Stocks also soared across the Asia-Pacific region after European governments pumped billions of dollars into their credit-starved banks and Washington said it would buy stakes in an array of financial firms.
"The markets had been saying it was necessary to inject public funds into troubled financial institutions, and countries have moved to do that," said Kazuhiro Takahashi, equity chief at Daiwa Securities SMBC.
It was a spectacular turnaround for the Nikkei, which plunged 9.62 per cent on Friday, the biggest loss in two decades, capping its worst week ever. Japanese markets were closed on Monday.
"In the short-term, it seems to have hit a bottom," Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities, told Dow Jones Newswires.
The surge came after Wall Street's Dow Jones index jumped 936.42 points or 11.08 per cent to 9,387.61, snapping an eight-session losing streak.
It was the Dow's biggest points gain on record and its sharpest percentage rise since 1933 during the Great Depression.
"It's far too early to say whether the key aspects of trust and confidence have returned to the markets, but it does appear as though we have turned a corner," said Martin Slaney, head of derivatives at GFT Global Markets.
Sydney ended up 3.7 per cent at 4335.20, Seoul climbed 6.1 per cent to 1367.69 and Hong Kong had gained 4.4 per cent by the midday break to 17027.83.
Wellington's NZSX-50 grew 5.99 per cent, adding 166.58 to 2948.97, China edged up slightly 0.38 per cent to 15856.82 while Bangkok soared 6.85 per cent.
Taiwan share prices closed 5.4 percent higher with constructions, financials and textiles leading the charge. The Taipei weighted index surged 271.12 points to 5291.56.
Singapore's blue chip Straits Times Index jumped 6.8 per cent after midday break, or 141.20 points to 2217.55, Kuala Lumpur's Composite added 1.78 per cent, Manila closed up 7.31 per cent at 2273.65, Mumbai climbed 4.67 per cent and Jakarta was up 6.79 per cent.
On opening, Russian stocks rocketed 6.57 per cent, London increased 2.65 per cent, and Frankfurt’s DAX gained 1.44 per cent.
"We've seen phenomenal gains," said Adrian Leppinus of Cameron Securities in Australia. "There's been a mad rush for people to get back in."
The roots of the financial crisis date to last year, when problems emerged with so-called subprime mortgages in the United States, and the world's markets are still sharply down since the beginning of the year.
Japan and Hong Kong are off about 38 per cent in 2008, South Korea is down 28 per cent, and Australia has lost 32 per cent.
US President George W. Bush and Treasury Secretary Henry Paulson were both due to make statements later in the day on action to shore up public confidence following the market turmoil.
Neel Kashkari, the newly appointed Treasury Department official tasked with managing the US$700-billion rescue package, on Monday revealed plans for the US government to buy stakes in several banks.
European leaders unlocked more than one trillion euros in rescue funds for the troubled banking sector, pledging to plough capital into the hardest-hit banks and massively underwrite loans between financial players.
In Australia, Prime Minister Kevin Rudd unveiled an economic stimulus package worth US$7.25 billion, warning the financial crisis was threatening economic growth and jobs.
As stocks rallied, the dollar rose to 102.87 yen, up from 102.01 in New York late on Monday.
"The firmer dollar against the yen reflects improved investor confidence following rallies on stock markets," said Marito Ueda, currency dealer at FX Prime.
"Markets are watching if further policy measures will come from the US government and if stock markets will really calm down," he said.
- AFP/yb
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