By V. Phani Kumar, MarketWatch HONG KONG (MarketWatch) -- Most Asian markets ended higher Monday, spurred by hopes for a steep U.S. interest rate cut and after the Bush administration said it would step in to prevent a failure of U.S. automakers. Japanese stocks led the charge, recovering most of the ground that they lost Friday, as investors brushed aside bad news, including a survey that showed a plunge in business confidence, Nomura Holdings' $302 million exposure to an investment firm run by Bernard Madoff and a report Toyota Motor Corp. could cut its earnings forecast. "I think this is only a seasonal rally. The fundamentals can change overnight," said Dale Tsang, managing director at Imperial Dragon Asset Management Co. "One may not see the kind of panic-selling we saw earlier, but there will be continued selling over a long period of time," he added. Going the other direction, Pakistani shares tumbled after the country's stock market regulator lifted a floor on stock prices that they had imposed in August, with analysts expecting further steep declines in coming days. The Nikkei 225 Average finished 5.2% higher at 8,664.66, after dropping 5.6% Friday, while the broader Topix index gained 4.1% to 846.93. The advance ignored Bank of Japan's tankan survey, which showed business sentiment dropped sharply, with the headline diffusion index for large manufacturers deteriorating at its fastest pace since August 1974, falling 21 points to minus 24. The reading was the worst in nearly seven years. See full story. Thailand's SET Index rose 2.8% to 436.56 after opposition leader Abhisit Vejjajiva, an Oxford-educated economist and leader of the Democrat Party, won a parliamentary vote to become the country's prime minister. The vote came two weeks after a court sacked Somchai Wongsawat as prime minister, after finding his People Power Party guilty of fraud in a December 2007 election that brought it to power. Hong Kong's Hang Seng Index rose 2% to 15,046.95, also rebounding after losing 5.5% Friday, and shrugging off a report in the Financial Times that HSBC Holdings has a potential exposure of $1.5 billion to an investment firm run by Bernard Madoff, a former chairman of Nasdaq, who was arrested last week and charged with securities fraud. An HSBC spokesman in Hong Kong declined to comment on the report. China's Shanghai Composite rose 0.4% to 1,962.60. Peter Pak, vice president at BOCI Research, said expectations that the U.S. government will find "an alternative plan to save the Big Three" automakers and that the Federal Reserve may cut interest rates by at least a half-point later this week contributed to the buoyancy in the markets. "Investors are anticipating stimulus measures from China before the Chinese New Year [in January]. The expectation is that the government may revise taxes to increase disposable incomes and also raise infrastructure spending," said Pak. Taiwan's Taiex ended 3% up at 4,613.72 and Singapore's Straits Times Index gained 2% to 1,774.76, while India's Sensitive Index, or Sensex, added 1.3% to 9,815.23 by late afternoon. Australia's S&P/ASX 200 rose 2.3% to 3,591.40 and South Korea's Kospi jumped 4.9% to 1,158.19, while New Zealand's NZX 50 index ended little changed at 2,676.43. Karachi declines Pakistan's KSE 100 index ended 2.8% lower at 8,927.39 after the Securities and Exchange Commission of Pakistan lifted a floor imposed on stock prices in late August. However, trading volumes were weak because of a 5% limit imposed on stock movements, analysts said. "Because shares can't move more than 5%, there are only sellers and no buyers," said Shuja Rizvi, Capital One Equities in Karachi.

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