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Asian stocks rally as Japan injects more money into market

Latest update : 2008-10-09

Japanese shares rebounded Thursday at midday, a day after world stocks took a historical plunge despite several central banks' decision to cut interest rates.The Bank of Japan pumped another 20 billion dollars to guarantee vital cash flow.

Asian stock markets were mostly higher in early trade Thursday after dramatic interest rate cuts by some of the world's top central banks, but the mood remained tense after recent heavy losses.
Dealers said it was too soon to say markets were over the worst of the recent turmoil unleashed by a US housing market meltdown, as policymakers scramble to prevent banks collapsing and stop stock markets plunging.
Tokyo stocks were up 1.25 percent by the lunch break, a day after falling more than nine percent, the biggest loss in two decades.
Hong Kong opened up 1.1 percent, Shanghai gained 1.59 percent, Singapore firmed almost one percent and Seoul added 0.2 percent.
But not all markets joined the rally. In Sydney stocks were down 2.2 percent by midday.
Trading remained suspended on the Indonesia Stock Exchange for a second day Thursday following a drop of more than 10 percent on Wednesday.
Investors remained nervous despite coordinated interest rate cuts by central banks in the United States, Canada and Europe, said Daisuke Uno, chief market strategist at Sumitomo Mitsui Banking Corp. in Tokyo.
The US Federal Reserve, the European Central Bank, the Bank of England and central banks in Sweden and Switzerland all cut their interest rates Wednesday by half a percentage point.
Central banks "had to take the action after watching the chain reaction of the market plunges," Uno said. "But a half-point cut was such a stingy move."
China joined in, too, cutting 27 basis points off its key rate, while the central banks of Taiwan and South Korea both followed suit on Thursday, lopping 25 basis points off their key interest rates.
Japan's central bank said it supported the rate cuts but was not participating as its own benchmark level was already low at 0.5 percent.
In an effort to keep credit flowing, the Bank of Japan injected 2.0 trillion yen (20.1 billion dollars) into the money markets on Thursday, adding emergency funds for a 17th straight business day.
US and European stock markets suffered another dizzying slide Wednesday, as traumatised investors there brushed aside the central bank interest rate cuts aimed at boosting confidence.
In New York, the Dow dropped 2.0 percent, ending in the red for a sixth consecutive session. The Dow has fallen more than 30 percent in a year.
Losses in Europe ranged from 5.18 percent in London to more than 8.0 percent in Vienna. Markets in Oslo and Stockholm were down more than 6.0 percent.
Investors fear that policymakers are running out of options to calm the turmoil unleashed by a US housing slump and related credit crunch.
"The market is far from being stabilised completely. Investors still remain unsure if Washington will move to inject public money" into ailing banks, said Toshihiko Matsuno, research head at SMBC Friend Securities.
There were growing fears that the financial crisis is taking a heavy toll on the major economies.
Japan's core machinery orders, a key gauge of corporate capital spending, slumped 14.5 percent in August from the previous month, the fastest drop in more than two years, adding to fears of a recession in Asia's biggest economy.
Japanese Prime Minister Taro Aso called for an additional economic stimulus package "very urgently" to shore up the world's second-largest economy.
The dollar was changing hands at 99.99 yen, up from 99.42 yen in New York late Wednesday, when it hit a six-month low. The euro fell to 1.3583 dollars from 1.3663 while rising to 136.11 yen from 135.85.

Date created : 2008-10-09