AP
Asia Stocks Jump After Wall Street Surge
Wednesday September 19, 1:39 am ET
By Yuri Kageyama, AP Business Writer
Asian Stocks Jump After Fed Rate Cut Sparks Wall Street Surge; Nikkei Soars 500 Points


TOKYO (AP) -- Asian stocks soared Wednesday in the wake of Wall Street's overnight surge spurred by the U.S. Federal Reserve's larger-than-expected interest rate cut.

Japan's benchmark Nikkei 225 stock index jumped 500.22 points, or 3.17 percent, to 16,302.02 points in afternoon trading. In Hong Kong, the blue chip Hang Seng Index was up 928.45 points, or 3.78 percent, to 25,505.3.

Stock markets in South Korea, India, Australia, Singapore, Taiwan and the Philippines also advanced. Chinese shares, however, fell.

Investors were cheered by a rally in U.S. stocks Tuesday after the Fed cut its benchmark interest rate by a half percentage point to 4.75 percent. The Dow Jones industrial average surged 335.97 points, or 2.51 percent, to 13,739.39 -- its biggest one-day point jump in nearly five years.

The move came after weeks of global market turmoil amid concerns over tightening credit conditions sparked by rising default rates among U.S. mortgage holders with poor credit. The U.S. rate cut signals that the Fed wants to prevent a slump in the U.S. housing market and turbulence in financial markets from starting a recession.

Asian investors have been worried that the credit crisis might drag on growth in the U.S. economy, a major export market for Asian companies.

"They did the right thing," Joseph Han, a strategist at Daewoo Securities Co. in Seoul, said of the Fed's aggressive cut. Many analysts had expected a quarter-point drop.

Later Wednesday, the Bank of Japan decided to leave its key interest rate unchanged at 0.5 percent, as widely expected.

The world's central banks like to show they are working together to maintain global stability, and the Bank of Japan would find it hard to raise rates at a time the U.S. is cutting them.

Also, there are persistent signs of deflation, or falling prices, in Japan's economy. And last week the government said the economy contracted in the April-June quarter at an annual rate of 1.2 percent, reversing its initial estimate for a 0.5 percent growth.

Kaoru Yosano, Japan's chief government spokesman, welcomed the Fed's decision.

"They have reacted very quickly to the realities," he told reporters.

In addition to cutting the federal funds rate by a half point, the Fed also reduced its discount rate, the interest it charges in making direct loans to banks, by a half-point as well to 5.25 percent. The Fed had also reduced the discount rate on Aug. 17 as it scrambled to respond to the growing credit crisis.

Encouraged by the U.S. moves, India's benchmark stock index rose to an all-time high in early trading, led by banking and technology stocks. The Sensex index of the Bombay Stock Exchange jumped 396 points, or 2.5 percent, to 16,065, the first time it has crossed the 16,000 mark.

In Seoul, the Korea Composite Stock Price Index was up 57.75 points, or 3.1 percent, to 1,896.36. The Philippine Stock Exchange Index rose 73.23 points, or 2.2 percent, to 3,362.98.

But China's benchmark Shanghai Composite index was down 58.91 points, or 1.1 percent, at 5,366.29. China's financial markets tend to move independently from other markets as they are largely isolated from global investment flows.