Asian markets rallied in the afternoon session Monday with financials stocks advancing on talks of a possible rescue plan for U.S. bond insurer Ambac. Japan surged 3 percent, but Shanghai shares slumped over 4 percent.
Financial firms such as South Korea's Woori Financial and Japan's Millea Holdings gained after news on Friday of a rescue plan for Ambac Financial, sparked hopes the bond insurer will maintain its top credit ratings, averting sell-downs of the debt it has guaranteed.
Japan's Nikkei 225 Average rose more than 3 percent, posting a six-week closing high as market sentiment improved after a newspaper reported that China's sovereign wealth fund planned to buyas much as $10 billion in Japanese stocks. Another big boost came from financial shares including top insurer Millea Holdings and banks on talk of the Ambac rescue plan.
South Korea's KOSPI added 1.3 percent, led by lenders on hopes the sector could avoid further damage from the credit crisis, while LG Electronics surged as investors bet robust handset sales would bolster its earnings.
Australian shares finished 1.1 percent higher, led up by the financials. But troubled asset manager Allco Finance Group slumped over 60 percentto its lowest in nearly six years after it said it planned to sell non-core assets to cut debt.
Hong Kong's Hang Seng Index closed 0.2 percent lower despite a positive open. Bourse operator Hong Kong Exchanges and Clearing fell 4.1 percent and weighed on the market again, as investors shunned the stock amid a decline in this year's turnover.
Singapore's Straits Times Index advanced 0.5 percent with banks such as United Overseas Bank making gains. Shares of SembCorp Marine, which posted a near 100 percent drop in fourth-quarter earnings, rose as much as 3.7 percent as investors focused on the prospects of the company's offshore rig-building business.
China's Shanghai Composite Index sank 4.1 percent over the huge supply of new shares, with Sinopec sliding after completing a 30 billion yuan ($4.2 billion) convertible bond offer. China Railway's offer of up to 22.3 billion worth of A shares in Shanghai is also hurting the market, by draining funds temporarily as subscriptions are taken, and by fuelling concern about the market's ability to absorb fresh supplies of equity in coming months.