ASIAN stocks jumped yesterday, rebounding from the worst week since at least 1987, on speculation bank bailouts and loan guarantees will prevent the credit crisis from worsening.
The Industrial and Commercial Bank of China Ltd, the world's largest bank by market value, surged 13 percent yesterday in Hong Kong after European leaders agreed to back new bank debt and the United Kingdom pledged to invest US$64 billion in three lenders. National Australia Bank Ltd, jumped more than 7 percent after the government guaranteed bank deposits. ICICI Bank Ltd soared a record 19 percent as the Indian bank assured customers their deposits were safe.
The MSCI Asia Pacific excluding Japan Index soared 7.7 percent to 273.54 at 4:42pm in Hong Kong, rebounding from last week's 20-percent tumble. Financial stocks accounted for almost half of yesterday's gain. Japan was shut for a holiday yesterday.
"As long as the market gets a sense of assurance that the big banks are not going to fall, a credit deadlock would be mitigated," said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co, which manages US$350 billion. "Financial stability is kind of assured for the short term."
Hong Kong's Hang Seng Index surged 10 percent, recouping more than half of last week's 16-percent plunge. India's Sensitive Index added 7.5 percent. Australia's S&P/ASX 200 gained 5.6 percent, its biggest advance since October 1997. Indonesia's Jakarta Composite Index rose 1 percent, erasing an earlier loss of 6.4 percent, as trading resumed following a three-day suspension, Bloomberg News reported.
World leaders are working to bolster financial systems to unlock credit markets and avert an economic collapse. About US$28 trillion has been erased from global equities this year. The MSCI World Index of stocks in 23 developed countries slid 20 percent last week, the most since records began in 1970.
European leaders pledged to guarantee new bank debt until the end of 2009 and keep distressed lenders afloat. The UK government said it will invest 37 billion pounds (US$63 billion) in Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group.
In Asia, Australia and New Zealand's governments said they will protect all deposits with financial institutions. Indonesia raised the maximum guaranteed deposits at banks 20-fold. Hong Kong said it may use foreign reserves to stabilize markets.
ICBC surged 14 percent to HK$4.28 (55 US cents). The stock lost 49 percent of its value in the past 12 months through Friday. Sun Hung Kai Properties Ltd, Hong Kong's largest developer by market value, rose 14 percent to HK$66.85, the most since October 1998. CapitaLand Ltd, Southeast Asia's biggest builder, climbed 14 percent to S$2.28 (US$1.55).
"At last we are seeing some light at the end of the tunnel," said Steven Leung, director of institutional sales at UOB-Kay Hian Ltd in Hong Kong. "We are finally seeing some buying in finance names."
National Australia Bank, the country's largest lender, rose 7.6 percent to A$22.40 (US$15.08). Commonwealth Bank of Australia, the nation's biggest provider of mortgages, rose 6.7 percent to A$42.20, and the central bank added A$2.85 billion to the financial system.
ICICI Bank, the Indian lender with the biggest losses on overseas investments, jumped 19 percent to 431 rupees (US$8.96).