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HONG KONG: Asian shares rose Monday on hopes of fresh stability in the markets but fears of recession loomed large, with South Korea unveiling a stimulus package to cushion the blow of the financial crisis.
The Seoul government, saying it expected a significant slowdown in exports, promised an extra 11 trillion won (US$8.5 billion) in spending next year as well as tax cuts of three trillion won to boost sagging domestic demand.
The strategy and finance ministry said the prospects of a swift turnaround in the global financial turmoil appeared dim, and reduced its economic growth forecast for 2009 to around four per cent from close to five per cent.
The turmoil that started out in the US subprime mortgage credit crunch "is causing concern over a global economic downturn," the minister of strategy and finance, Kang Man-Soo, told reporters.
Separately, Chinese Prime Minister Wen Jiabao said China would take a hit from the crisis and that inflation remained a serious challenge.
"The global financial turmoil and the economic downturn are getting worse," Wen wrote in a signed article in Qiushi, a journal published by the Communist Party.
"Inflationary pressure remains large as the world oil price is still at a high level despite some corrections. All these negative factors have affected and will continue to affect China."
China's growth slowed to nine per cent in the third quarter of this year - the lowest quarterly figure since the second quarter of 2003.
Stock market gains in Asia were led by Hong Kong, where the Hang Seng rose 5.23 per cent.
Australian share prices were up three per cent, with financial stocks leading the way ahead of an expected rate cut and after Friday's Wall Street rally.
Singapore shares were up more than four per cent, South Korea's KOSPI index rose 2.33 per cent shortly after opening and Taipei climbed 1.13 per cent.
It followed a rally in US and European shares last week that brought solid gains - the Dow Jones rose 1.57 per cent - although not enough to compensate for the panicked global sell-off last
Equities in Frankfurt, London, New York and Paris all plunged by 15 to 17 in October, while Tokyo lost about a quarter of its value.
On Sunday, British Prime Minister Gordon Brown said he expected Saudi Arabia to give more money to bolster the International Monetary Fund's ability to bail out nations hardest hit by the economic chaos.
The IMF has some US$400 billion available to help countries struggling to stay afloat - but Brown wants to increase this by hundreds of billions of dollars.
"The Saudis will I think contribute like other countries so we can have a bigger fund worldwide," said Brown on a four-day tour of oil-rich Gulf states to drum up support for his plan.
"I think people want to invest both in helping the world get through this very difficult period of time but also I think people want to work with us so we are less dependent on oil and have more stability in oil prices."
He was speaking a day after talks with Saudi King Abdullah, who will attend a special Group of 20 summit of leading industrialised and developing nations in Washington on November 15 devoted to the unfolding crisis.
In Latin America, Venezuelan President Hugo Chavez said that his government would "expropriate" its banks if hit by the financial crisis.
Meanwhile Portuguese Finance Minister Fernando Teixeira dos Santos said the Lisbon government would propose to parliament nationalising the Banco Portugues de Negocios.
The bank, which has sustained heavy losses, would be placed in the hands of state-owned Caixa Geral de Depositos, Portugal's largest bank.
Finance ministers from the 15 European Union nations that use the euro are to meet Monday in Brussels, a few hours after the European Commission puts out its latest economic forecasts.
- AFP/yb
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