SINGAPORE (Dow Jones)--Asia joined a global rally for stock markets Thursday, led by Hong Kong shares jumping 5.9% to notch their biggest intraday rally in nearly two years, after major central banks took coordinated action Wednesday to lower dollar funding costs to European banks and prevent a full-blown financial crisis.
Regional currencies rallied against the U.S. dollar, while exporter stocks and financial plays rose on hopes policy makers were moving fast to forestall a double-dip recession for the global economy. A surprise move Wednesday by the People's Bank of China to cut its reserve requirement ratio for the first time in over three years also added to the upbeat mood.
The coordinated action from central banks is "a welcome development, as the underlying situation in Europe seemed to be spiralling out of control," said Jason Hughes, strategist at IG Markets in Singapore. "This cheaper lending of U.S. dollars for the European banks has given investors a boost in confidence and helped to squeeze short positions, especially as this might be the first meaningful development in the ongoing European debt saga," he said.
The Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank agreed Wednesday to lower the pricing on existing temporary U.S. dollar liquidity swap arrangements by fifty basis points. While the joint action did not address Europe's sovereign-debt problems it underscored a sense of urgency to address the broad issues ailing the global financial system.
Hong Kong's Hang Seng Index advanced 5.3% after earlier surging 5.9%, marking the biggest intraday gain since April 2009. China's Shanghai Composite advanced 2.3%, Japan's Nikkei Stock Average rose 1.9%, Australia's S&P/ASX 200 climbed 2.6%, South Korea's Kospi Composite jumped 3.7% and India's Sensex advanced 2.7%. Asian currencies were also broadly higher, with the Korean won briefly jumping to a two-week high against the U.S. dollar; the greenback was recently fetching KRW1,133.40, from KRW1,143.00 late Wednesday in Seoul.
Dow Jones Industrial Average futures were down seven points in screen trade.
The PBOC Wednesday cut the reserve requirement ratio for banks by 50 basis points in a move that many believe signals the beginning of a monetary easing cycle in China. The apparent pre-emptive action came ahead of Thursday's data showing manufacturing activity contracted for the first time in more than two and a half years and underscored fears the European crisis was starting to hurt Asia. China's official manufacturing Purchasing Managers Index fell to 49.0 in November from 50.4 in October, reflecting weaker external demand amid a sluggish global recovery.
"The PBOC move suggests activity in China is slowing more rapidly," said Khoon Goh, senior economist at ANZ Bank in Wellington. "The steps taken (by central banks) overnight will certainly help ease some of the pain, but we are still waiting for the longer-term solutions to emerge," he said.
Financial stocks led a broad-based rally in the region as investors were encouraged policy makers were finally taking decisive action to prevent a repeat of the 2008 global financial crisis.
In Shanghai, China Construction Bank gained 2.4%, while HSBC advanced 5.7% in Hong Kong. In Sydney, ANZ Bank rose 3.0%, while Mizuho Financial Group advanced 2.0% in Tokyo.
Resources stocks that depend heavily on China's vast market jumped sharply, with Rio Tinto up 4.7% and BHP Billiton up 4.1% in Sydney. Exporter stocks joined the rally. Japan's Toyota Motor rose 2.3% and Sony advanced 2.7%, and in Seoul Samsung Electronics jumped 7.0% and Hyundai Motor advanced 4.0%.
The euro was steady against the dollar following a short-lived surge against the greenback Wednesday on the collective central bank action. Traders say the focus will return to how European policy makers plan to forge ahead with a credible fix to contain the Continent's debt crisis.
The single currency was at $1.3453 against the dollar, from $1.3446 late Wednesday in New York, and at Y104.50 against the yen, from Y104.24. The dollar was at Y77.66 from Y77.63.
Spot gold was at $1,744.30 per troy ounce, down $5.10 from its New York settlement on Wednesday. Nymex January crude oil futures were up 30 cents at $100.66 per barrel on Globex.
-John Phillips, Dow Jones Newswires; +65-6415-4142; john.phillips@dowjones.com
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