Investors cheer U.S. plan to buy up to $1 trillion in bad assets from banks
HONG KONG: Asian stocks rose to a two-month high on Monday and high-yielding currencies advanced on the yen after details of a U.S. plan to rid banks of up to $1 trillion in toxic assets bolstered confidence in risk taking.
The White House said it would put as much as $100 billion into a bailout fund and give attractive financing to private investors to buy highly illiquid assets from banks, prompting dealers to dive back into equities and trim their holdings of safe haven assets like U.S. Treasurys.
Major European stock markets rose more than 1%, indicating higher openings, while U.S. stock market futures were up 2% as a wave of optimism spread.
Still, doubts lingered, with the U.S. housing market showing few signs of bottoming yet, uncertainty over how the bad debts will be priced and concerns whether more borrowing by over indebted households is the solution to a credit crisis.
"If the U.S. authorities actually succeed in buying up to $1 trillion of 'toxic assets', it would be considered a significant step by the financial markets. However, the markets will be disappointed if the programmes did not move forward due to problems regarding how the assets' value is measured," said Mamoru Yamazaki, chief economist with RBS Securities in Tokyo.
The Nikkei share average ended 3.4% higher, closing at the highest level since late January, getting the biggest boost from technology shares.
Shares in Japan's big banks outperformed. Mizuho Financial Group rose 5.3% and Mitsubishi UFJ Financial Group, the country's biggest bank, gained 4.7%. MUFG said earlier it would cut 1,000 jobs.
The MSCI index of Asia Pacific stocks outside Japan was up 4%, hitting a two-month high, supported mostly by the energy, financial and materials sectors.
Hong Kong's Hang Seng index rose 3.4%, led by a 5.3% gain in China Construction Bank. Index heavyweight HSBC slipped 2.5% as its deeply discounted rights shares begin trading on Monday.
Details of the U.S. toxic debt plan, which slowly emerged through newspaper reports over the weekend, extended a global stock market rally that has lasted nearly two weeks on hopes the financial system was stabilizing after some of the largest U.S. banks said they had solid results in the first two months of the year.
BlackRock Inc, the largest U.S. publicly traded asset manager, said it would take part in the plan as an investment manager on the program, relieving some uncertainty as to how much private participation there would be.