Most Asian markets made a sharp turn into positive territory after the New York Times reported that the U.S. government is considering taking over the two top U.S. mortgage finance companies.
If problems at Fannie Mae and Freddie Mac -- which have been under fire on fears they may not be able to get the capital they need to survive -- persist, Washington may place one or both of the government-sponsored entities under conservatorship, essentially meaning U.S. taxpayers would guarantee the mortgages on their books, the New York Times said, citing people briefed on the plan.
The report came as some relief to investors who have watched Fannie's and Freddie's shares fall 30 percent and 45 percent respectively this week, sparking fresh concern that the ongoing global credit crisis could have a knock-on effect on regional economies.
Japan's Nikkei 225 Average edged down 0.2 percent, led by exporters such as Canon as investors grew cautious ahead of U.S. bank earnings next week. Before ending lower, the market had climbed in the afternoon on that New York Times report, which help push Japanese financial counters such as Mizuho Financial Group and Sumitomo Mitsui Financial back onto positive ground.
Seoul shares finished nearly 2 percent higher as the mortgage report gave stocks a boost in afternoon trade, extending gains from a rebound in oversold blue chips. POSCO, the world's No. 4 steel maker, rose 2.2 percent ahead of its earnings announcement due shortly after the close.
Australian shares rose 0.9 percent as strong commodity prices lifted resource firms such as BHP Billiton and Newcrest Mining, while banks pared losses on the Fannie/Freddie conservatorship report.
Hong Kong shares beat early uncertainty to rise 1.7 percent, as investors cheered the mortgage takeover report. Investors charged back into the market in late morning trade led by Chalco. Its shares surged as much as 7 percent after international aluminum prices jumped to a record high on output cuts by China's top producers.
Singapore's Straits Times Index gained 0.9 percent. Shares of rubber plantation firm GMG Global climbed as much as 6.7 percent on news that China's Sinochem will offer to buy a 51 percent stake in the company for S$267.98 million (US$197 million).
Chinese stocks bucked the trend and were 0.7 percent lower, led down by property, steel and financial shares, as investors scrambled to take profits on a rebound earlier this week, when the main index neared chart resistance. Property giant Vanke lost over 5 percent while Baoshan Iron and Steel dropped 3 percent. CITIC Securities slid more than 3 percent.