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Asian markets rebound on U.S. stimulus hopes

/ Source: The Associated Press

Asian markets mostly recovered from early plunges Friday on hopes that President Bush will propose measures to keep the U.S. economy from sliding into a recession. Investors snapped up shares that had been beaten down in recent days.

In Tokyo, the region’s biggest market, the benchmark Nikkei 225 stock index rose 0.6 percent to 13,861.29, reversing an opening 3 percent plunge in the wake of an overnight drop on Wall Street.

Hong Kong’s benchmark index rose 0.4 percent to 25,210.87 after plummeting as much as 3.7 percent in morning trade.

“The reports that Mr. Bush may have a plan for the subprime mortgage crisis made the Nikkei rise,” said Noritsugu Hirakawa who monitors stock trading at Okasan Securities Co. “Japanese stocks may be bottoming out.”

Worries about a slowdown in the U.S. economy — a major export market — have dragged down Asian markets since the start of the year.

President Bush is expected to outline his position later Friday on an emergency economic stimulus package that is being negotiated in Congress. Bush told congressional leaders that he favors income tax rebates for people and tax breaks for business investment as ways to jump-start the U.S. economy, which has been battered by a credit crisis and a slowdown in the housing market.

In early trading, markets across Asia sank rapidly in what appeared to be a repeat of Wednesday’s rout as investors reacted nervously to an overnight plunge on Wall Street, unexpectedly weak U.S. manufacturing figures and dismal housing starts data.

But as the day progressed, investors bought up shares, especially those viewed as less exposed to the U.S. economy, causing many markets to recover. By the day’s end, South Korea’s market rose 0.7 percent, and Taiwan’s benchmark index rose 1 percent.

But in the Philippines, the key index sank 2.5 percent and Australia’s market slid 0.8 percent.

In Japan, gainers included property and steel companies like Sumitomo Realty & Development Co., which surged 8.01 percent, and Nippon Steel Corp., which jumped 5.23 percent.

Some speculation emerged in Hong Kong that the U.S. Federal Reserve might cut interest rates before their next meeting on Jan. 29-30 — and perhaps even later Friday.

“We bet on a 50 basis-point rate cut by the U.S. Fed before the FOMC meeting later this month, with a good chance tonight,” said Ernie Hon at ICEA Securities, referring to the policy-setting Federal Open Market Committee.

Beyond alleviating concerns about the American economy a rate cut by the Fed would also benefit the local market, particularly property stocks. Hong Kong rates tend to track U.S. rates because of the local currency’s peg to the U.S. dollar.

Still, investors around the world remain jittery about the full extent of the sub-prime mortgage crisis in the U.S., which has led to a credit crunch and billions of dollars of losses at major American investment banks Citigroup and Merrill Lynch & Co. due to writedowns of bad assets.

And recent signs of slower U.S. consumption has added to concerns that the American economy might contract, weakening demand for Asian electronics, autos, clothing and other exports.

Japanese Economy Minister Hiroko Ota, who has in the past sometimes played down the worries about growth, acknowledged the risk of a U.S. economic slowdown was real.

“U.S. economic indicators have been sluggish,” she told reporters Friday. “We will carefully watch how this will impact the Japanese economy.”

Castor Pang, a strategist with Sun Hung Kai Financial in Hong Kong, said the market was still “in a seesaw situation.”

“Investors don’t have a direction,” he said. “They’re waiting for news out of the U.S.”