Asian stocks make sharp rebound

Asian stockmarkets rebounded sharply on Monday as worries about a credit squeeze were soothed and appetite for risk sharpened after the Federal Reserve on Friday to cut the discount rate by half a percentage point.
On Monday, central banks in Japan and Australia injected more money into the financial system to keep short-term interest rates under control.
Indonesian equities led the day, with the Jakarta Composite Index jumping 6.6 per cent. Indices in Singapore, Seoul, Hong Kong and Shanghai all rose by 5 per cent or more. In Japan the Nikkei rose 3 per cent to 15,732.48; exporters benefited as the yen weakened against the US dollar to Y115.46.
The MSCI Asia-Pacific Index of regional shares surged 4 percent, according to Bloomberg.
“Today there’s a huge sense of relief in equity markets,” said a senior trader in Singapore. “The rally may even extend for a few more days. But it may take a couple of months before we’re back to normal conditions.”
The Fed’s decision to make cheaper loans available directly to banks was welcome, he said, but added that when markets and economic conditions were this uncertain, “you don’t solve things in a few days.”
The Fed sent a signal to the markets that it would make sure the US financial system operated smoothly, said Adrian Mowat, chief Asian and emerging markets equity strategist at JP Morgan Securities in Hong Kong. He had been expecting tighter policy at the next Federal Open Markets Committee meeting; “now as a house we are forecasting the Fed will cut rates on September 18.”
The Bank of Japan injected another Y1,000bn into the money markets, repeating last week’s tactics, and the Reserve Bank of Australia added US$2.67 billion in cash.
Australian shares lagged some of the other big moves in the region. Nevertheless, the benchmark S&P/ASX 200 index closed the trading day 4.6 per cent higher at 5,932.6.
Financial and mining stocks advanced, having been some of the worst-affected sectors during last week’s turmoil.