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Markets Gain on Rescue Plan, Questions Remain

CNBC.com
Monday, 22 Sep 2008 | 5:26 AM ET

Asian markets climbed Monday, after more details about the U.S. government's $700 billion crisis solution encouraged bargain hunting, but questions lingered about long-term implications and the economic outlook.

Many aspects of the plan have yet to be worked out and tensions have already arisen over Congressional efforts to curb the executive pay of program participants. However, analysts and investors were looking beyond the days of massive writedowns and focusing more on where growth will come from.

The U.S. dollar fell against the yen and Swiss franc , and U.S. Treasury debt prices edged up, with market participants playing it safe before the plan is ironed out in Congress. Meanwhile crude oil moved above $105 a barrel on expectations the rescue plan would sustain the U.S. economy.

Japan's Nikkei 225 Average gained 1.4 percent to a one-week closing high. Nomura Holdings shot up more than 9 percent on news that it has bid for both the Asian and European operations of Lehman Brothers, while GS Yuasa Corp plunged
after the car battery maker said it had found improper accounting at a subsidiary.

Seoul shares ended steady after Wall Street rallied on Friday on hopes prompted by a U.S. government plan to rescue the financial system, but caution over success of the plan and higher oil prices pared early gains.

Australian shares finished 4.5 percent higher, boosted by a ban on short sellingand renewed
confidence after the U.S. government unveiled steps to rescue the financial system. Babcock & Brown closed over 50 percent higher. The investment group was up over 100 percent at one point of the trading session.

Hong Kong shares closed 1.6 percent higher as investors locked in gains on Friday's sharp rally, anticipating a weak trading session on Wall Street later on Monday. Offshore oil producer CNOOC jumped 6 percent after crude oil posted its biggest three-day rally in a decade with a 7 percent gain pushing prices well above $104 per barrel, on Friday.

Singapore's Straits Times Index closed 0.6 percent lower. Shares of China Milk Products closed 4.4 percent lower, recovering from a 15 percent tumble, despite the firm's assurances that its milk was safe. The China-based seller of raw milk, who businesses include the production and sale of bull semen and dairy cow embryos, said in a press release on Thursday that none of the manufacturers of affected milk powder brands were customers and that it has yet to receive any complaints from customers.

Chinese stocks surged 7.8 percent in hectic trade, extending big gains posted on Friday in response to a Chinese government rescue package for the market. After the announcement of the government support package on Thursday evening, analysts had predicted the index could jump about 20 percent. Now that it has almost done so, some believe the market will soon become vulnerable to a pull-back. While shares in big banks may stay strong because of the potential for the government to buy shares in them, shares in industrial companies could start to lose steam this week because of slowing economic growth.