- The Washington Times - Friday, September 19, 2008

HONG KONG (AP) – Asian stock markets soared Friday after a punishing week as news of a possible U.S. government plan to rescue banks from toxic mortgage debt brought hope of a letup in the world’s worst financial crisis in decades.

Hong Kong’s Hang Seng Index jumped 7 percent at the open and was up 6.5 percent at the midday break at 18,779.03. Japan’s Nikkei 225 average was up 3.8 percent at 11,920.86.

In China, the Shanghai benchmark surged a stunning 9.5 percent after the government eliminated a tax on share purchases and said it was buying shares in state-owned banks. Stock measures in Taiwan, South Korea and Australia were also sharply higher.

Following days of steep losses, regional markets got a boost from overnight gains on Wall Street, where the Dow Jones industrial average surged 410.03, or 3.86 percent, to 11,019.69 – the biggest percent gain since October 2002.

Investors also were encouraged by news that the U.S. government was seeking the power to rescue banks by buying distressed assets at the heart of the financial system turmoil that’s brought down Wall Street giants Lehman Brothers, Merrill Lynch and Bear Stearns.

Details of the plan were still being worked out, but U.S. Treasury Secretary Henry Paulson emerged from a nighttime meeting on Capitol Hill to say he hoped to have a solution “aimed right at the heart of this problem.”

“It definitely gives investors a light at the end of the tunnel,” said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. “The solution is of such a magnitude that it could eventually fix the problems … That’s hugely important at the moment because that’s what markets are focused on.”

The biggest bonus of a potential government fix is it could help the banking industry as a whole, said Scott Fullman, director of derivative investment strategy for New York-based institutional broker WJB Capital Group. Until now, the U.S. government has selectively bailed out institutions that were the most vulnerable.

The news triggered a rally in U.S. stock futures, suggesting Wall Street would advance Friday, too. Dow futures rose 126 points, or 1.2 percent, to 11,108 and S&P; 500 futures rose 32 points, or 2.6 percent, to 1,234.4.

“Bear markets are extremely sensitive, and this market on a scale of one to 10 is a 13,” Fullman said. “I don’t say any prudent money manager would say we’re out of the woods, but right in this moment it all seems positive and leading toward an upward move for the market going into Friday session.”

Further aiding the markets, the Bank of Japan pumped another 2 trillion yen ($18.7 bilion) into money markets, following Thursday’s coordinated effort by central banks around the world to keep the financial system liquid. It was the bank’s seventh injection this week.

Word of a possible U.S. bailout lifted Asian banks, which had tumbled earlier this week.

Macquarie Group Ltd., Australia’s biggest investment bank and securities firm, surged 35 percent.

Shares of China’s biggest lender, Industrial & Commercial Bank of China Ltd, or ICBC, rose 14.2 percent in Hong Kong and 9.9 percent in Shanghai.

Japanese megabanks were up strongly, with Mitsubishi UFJ 9.8 percent higher and Mizuho Financial Group adding 9.6 percent.

In China, the market was driven partly by a government move to shore up the ailing markets by eliminating a 0.1 percent tax on share purchases, effective Friday. The government also announced plans to use an investment fund to buy stocks in three major banks to help stabilize their share prices, down sharply following Lehman Brothers’ bankruptcy.

Bank of China, the country’s second-largest lender, surged 10 percent , the daily maximum limit. China Construction Bank also had gained 10 percent.

Oil prices were steady in Asia. The October contract rose 24 cents to $98.12 a barrel midday, adding to its 72 cent gain overnight.

AP writer Jay Alabaster in Tokyo and AP Business Writers Elaine Kurtenbach in Shanghai and Joe Bel Bruno in New York contributed to this report.

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