Asian markets soared Thursday, with Japan closing 10 percent higher and South Korea gaining a whopping 12 percent on international efforts to provide liquidity to emerging markets and global prospects of lower borrowing costs.
Commodity prices jumped and the yen weakened in the wake of the Federal Reserve's cut in rates to the lowest since June 2004, to soften the blow of a potentially deep recession. China, Hong Kong, Norway and Taiwan all delivered cuts of their own, and pressure mounted on the Bank of Japan to reduce rates after it meets on Friday.
The avalanche of government measures taken to increase bank liquidity, including $120 billion of currency swap lines opened between the Fed and four developing economies, and global rate cuts have prompted investors to make room in their cash-heavy portfolios for riskier assets. Credit availability and risk taking are essential to the functioning of the financial system.
The yen weakened on the combination of increasing risk appetite as well as expectations of the first rate cut by the Bank of Japan since the financial crisis broke out more than a year ago. The euro jumped 2.9 percent against the yen to 129.86 yen. The euro hit a 6-1/2-year low below 114 yen last Friday. The U.S. dollar rose 1.6 percent to 99.00 yen, staying well above a 13-year trough of 90.87 yen hit on trading platform EBS late last week. Crude oil futures climbed towards $70 a barrel in the Asian session.
The Nikkei 225 Average surged 10 percent to post its highest close in over a week, buoyed by exporters such as Kyocera on a softer yen and amid talk of a rate cut by the Bank of Japan after similar moves by the United States and China. The 10 percent jump was the biggest one-day gain since Oct. 14, when the Nikkei surged 14.2 percent for the biggest one-day gain in its history. The broader Topix shot up 8.3 percent to 899.37.
Seoul shares jumped 12 percent, posting their biggest-ever daily percentage gain led by technology and industrial issues, while volatile banks belatedly reacted to news of a currency swap line set up overnight between South Korea and the U.S. Federal Reserve. Banks reversed earlier double-digit falls to trade sharply higher, with KB
Financial Group ending up 9.38 percent and Shinhan Financial Group rallying 13.79 percent.
Australian shares finished 4 percent higher, extending their rally to a second day, as mining and energy companies gained on the back of a rebound in oil and base metals prices. Top miner, and the benchmark index's top weighted stock, BHP Billiton roared up 8.7 percent, while rival
and takeover target Rio Tinto jumped 9.2 percent.
Hong Kong shares rallied for a third straight day, surging 12.8 percent after another round of rate reductions worldwide, but the main index is still over 50 percent off its life-high hit on the same day last year. CNOOC, China's top offshore oil refiner climbed 22.4 percent, adding to Wednesday's 10.8 percent rally. Asia's largest oil & gas producer, Petrochina, soared 19.9 percent after it posted a 30 percent increase in quarterly profit on the back of higher oil prices and a government hike in fuel prices.
Singapore's Straits Times Index leapt 7.8 percent with banks such as DBS Group and UOB leading the advance. DBS Group was up 8.5 percent and CapitaLand was up 8.4 percent. Commodities related firms Noble Group and Olam International both gained around 20 percent.
The Shanghai Composite Index rose more than 2.6 percent led by large caps after China cut interest rates for the third time in six weeks, while drawing strength from a surge in regional
markets. The Chinese market had underperformed the region during morning trade but began to catch up in the afternoon, as the index of Asia-Pacific stocks outside Japan soared 10 percent.