Hong Kong: Asian stocks pushed higher on Monday and the dollar lost ground as investors looked for US President-elect Barack Obama to quickly roll out hefty economic stimulus spending and a revived plan to buy bad bank assets.
Obama is set to take office on Tuesday following a US national holiday on Monday, and many investors have hoped for weeks that he will undertake aggressive action to help pull the economy out of its deep, year-long recession.
A top Obama adviser, David Axelrod, said the incoming administration is considering setting up a government-run bank to acquire bad assets - the original purpose of the $700 billion Troubled Asset Relief Program.
Stocks have clawed back after the US government injected $20 billion of capital into Bank of America last week and offered debt guarantees to help its take-over of Merrill Lynch.
Barclays Plc responded to a 25% tumble in its shares on Friday by saying it expects to report a pre-tax profit for 2008. The move came as news reports said Britain is poised to unveil a nearly $300 billion toxic debt guarantee for its banks later on Monday, its second bank rescue package in four months.
Renewed fears that major financial institutions will be forced to write down billions of dollars more in assets and raise significant capital have taken the wind out of a brief revival of risk taking, driving many equity indexes to one-month lows last week.
“The focus is now on the inauguration of the US president. Hopes are growing again as economic stimulus steps will likely be bigger than previously thought, and may include additional measures to shore up banks,” said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.
Investors are bracing for more dismal news from companies as quarterly earnings season kicks into high gear, which could deal another blow to the rebound in stocks and emerging market currencies from lows hit late last year.
The MSCI index of Asia-Pacific stocks outside Japan rose 1.3% and is up 21% from a five-year low hit in November. The MSCI index had been up as much as 37% from that low early in January.
Japan’s Nikkei average gained 0.8%, helped by the yen’s broad dip that gave a boost to shares of major exporting companies.
South Korean shares rose 1.4% as battered technology shares advanced on hopes the industry downturn may have hit a bottom.
Hong Kong’s Hang Seng index rose 0.9%, despite further losses for index heavyweight bank HSBC, which fell 3.4% on continued fears it may have to raise more capital and cut its dividend as global economic turmoil worsens.
Traditional safe havens - the dollar, government bonds and gold - backtracked as investors shifted into riskier assets.
The euro edged up 0.5% to $1.3360, up from a one-month low near $1.3025 hit last week. The dollar was up 0.4% versus the yen at ¥91.05 yen, getting a lift from the yen’s broad retreat.