By V. Phani Kumar, MarketWatch HONG KONG (MarketWatch) -- Asian markets shot higher Wednesday, as expectations of interest-rate cuts and economic-stimulus measures forced bearish investors to reverse bets that the downtrend in stocks will continue. Resource stocks such as Rio Tinto and financials like HSBC Holdings finished sharply higher, helping indexes gain across the region. Japan's Nikkei 225 Average took its winning streak to a third session, climbing 3.2% to 8,660.24, its highest finish in nearly a month. The broader Topix index added 2% to 834.55. Hong Kong's Hang Seng Index jumped 5.6% to 15,577.74, reclaiming the psychologically crucial 15,000-point level after dropping 1.9% in the previous session. "Investors are expecting further rate cuts in the U.S. and that Hong Kong may follow. The market overcame the resistance at 15,000, so the short positions got squeezed," said Andrew To, sales director at Taifook Securities in Hong Kong. The U.S. Federal Reserve was widely expected to cut its benchmark interest rate by a half-point to 0.5% next week. "The focus will return to fundamentals and corporate earnings in February, but right now, investors are enjoying the ride," To added. China's Shanghai Composite also rebounded from losses to finish 2% higher at 2,079.12. Earlier in the day, official data showed the country's producer-price inflation climbed a lower-than-expected 2% in November from the year-ago month, after rising as much as 6.6% in October. India's Sensitive Index, or Sensex, rose 4.5% to 9,578.38 by late afternoon, as trading resumed after Tuesday's holiday. Australia's S&P/ASX 200 climbed 1% to 3,640.70, also reversing early declines, and South Korea's Kospi added 3.6% to 1,145.87. Singapore's Straits Times Index advanced 3.7% to 1,818.35 by late afternoon. Taiwan's Taiex rose 4.2% to 4,658.87 and New Zealand's NZX 50 index slipped 0.5% to 2,711.55. "We are well into the period where we're expecting hedge-fund closures, and daily we're hearing about funds reducing staff. But from the investor point of view, there's still a lot of optimism out there about [government] economic-stimulus packages," said Benjamin Collett, head of hedge-fund sales trading at Daiwa Securities SMBC. Regional detail Shares of Air China soared 22.1% in Hong Kong and rose 4.2% in Shanghai a day after the Chinese civil-aviation regulator said it was encouraging airlines to cancel or postpone taking delivery of aircraft due in 2009 because air-travel demand is falling. In Tokyo, Elpida Memory jumped 16.7%, on top of Tuesday's 17.6% surge. Reuters reported that the chipmaker could be forced to redeem a recently issued $540 million convertible bond. The shares had suffered deep losses on concerns about equity dilution. Shares of Sony Corp. gained 1.1% in line with the broad market. The stock had dropped earlier in the session after the company Tuesday announced a restructuring, which includes slashing 8,000 full-time jobs worldwide, reducing investments in the electronics business by 30%, closing 10% of its 57 manufacturing sites and withdrawing from unprofitable businesses because of a global economic downturn. See full story. Later Tuesday, Sony said it would close a plant in Pennsylvania, affecting 560 staffers, as part of the plan. In Sydney, Westpac Banking Corp. slumped 8.5% as trading resumed after its A$2.5 billion ($1.67 billion) institutional share placement. Shares of Commonwealth Bank of Australia dropped 5% after the lender said it will raise A$750 million in capital by issuing shares to Merrill Lynch International (Australia). But financials rallied elsewhere, with market heavyweight HSBC Holdings climbing 4.4% in Hong Kong, Icici Bank surging 8.2% in Mumbai late-afternoon trading, Industrial Bank of Korea jumping 12.7% in Seoul and Mizuho Financial Group adding 5.6% in Tokyo. In Sydney, resource stocks advanced to help the broad market overcome weakness in banking shares, with BHP Billiton gaining 6.7% and Rio Tinto surging 12.1%. The jump in Rio shares came before the company said it would slash 14,000 jobs, pare net debt by $10 billion by the end of 2009 and lower "controllable operating costs" by at least $2.5 billion a year in 2010, in addition to more than halving its estimated capital expenditure for 2009 to $4 billion from $9 billion. The measures were in response to the impact of the "unprecedented rapidity and severity of the global economic downturn," Rio said. See full story. January crude-oil prices rose 94 cents to $43.01 a barrel in electronic trading, after dropping $1.64 to $42.07 a barrel Tuesday on the New York Mercantile Exchange. In Asian currency trading, the U.S. dollar bought 92.52 yen, compared with 92.60 yen late Tuesday. On Wall Street, the Dow Jones Industrial Average lost 2.7% to 8,691.33 and the Nasdaq Composite gave up 1.6% to 1,547.34, while the S&P 500 index shed 2.3% to 888.67.

Source