Asian stocks closed firmly higher Wednesday, though off their earlier highs, after the U.S. Federal Reserve, in a joint effort with other central banks, said it would add up to $200 billion in funds to help resuscitate strained credit markets.
The move would allow financial firms to use a broader base of securities as collateral, including mortgage bonds whose value has declined as the housing bubble burst, easing concerns about a deepening credit crisis. The news triggered a rally on Wall Street on Tuesday, driving the three major indexes up over 3 percent.
This also boosted financial stocks across the region with Citigroup's Japan listing and Macquarie Group, Australia's top investment bank, both gaining over 7 percent. South Korea's Hana Financial and Singapore's OCBC were also sharply higher.
As stocks gave back some ground, the "safe haven" Japanese yen is now regaining strength against the U.S. dollar with the dollar back below the 103 level -- which suggests traders are starting to look past Wednesday's Fed action. The dollar has also weakened against the euro , prompting corresponding reactions in crude oil and gold prices.
Japan's Nikkei 225 Average closed 1.6 percent higher. The market fell from early highs on worries the move would not solve all credit woes. Banks surged, with No. 3 bank Sumitomo Mitsui Financial Group up 6.4 percent, finishing at its highest level since March 3.
Other banks made similar gains.
South Korea's KOSPI finished up 1.1 percent, off highs, but supported by financials and shipbuilders. Kookmin Bank and Shinhan Financial Group both rose.
Australian shares rose 2.4 percent, led by financial firms. But the market ended well off early highs on doubts that the Fed's action would provide a lasting solution to credit problems. Among the top banks -- Australia and New Zealand Banking Group and Westpac Banking both advanced.
Hong Kong stocks jumped 1.9 percent as investors cheered coordinated moves by global central banks to inject liquidity into credit markets. HSBC Holdings advanced further, tracking U.S. financials higher and on course to post its third-straight rising session. Shares in Hong Kong property developers also outperformed. Hang Lung Properties and Sun Hung Kai Properties both climbed.
Singapore's Straits Times Index was up 2 percent in line with the region's rally, led by gains in financial stocks such as DBS Holdings and bourse operator Singapore Exchange.
Chinese stocks bucked the rally and closed 2.3 percent lower as concern about monetary tightening caused them to underperform foreign bourses, which surged in response to foreign central banks' new plan to inject funds in global credit markets.