Asian stocks up on Europe’s pledges to help banks

Asian stocks up on Europe’s pledges to help banks

Bangkok: Asian stock markets surged higher on Tuesday following a pledge by European leaders to protect the region’s banks against a continent-wide debt crisis.

Hong Kong’s Hang Seng index shot up 4% to 18,376.55 in early trading. Japan’s Nikkei was 2.2% higher at 8,796.69. South Korea’s Kospi rose 2.2% to 1,805.72, and Australia’s S&P ASX 200 index gained 0.8% to 4,232.50.

Benchmarks in Taiwan, Singapore, mainland China and the Philippines were also higher by 1% or more. The gains in Asia followed a strong rally on Wall Street on Monday.

The Dow Jones industrial average soared 330 points, or 3%, its biggest one-day gain since 11 August. The Dow closed at 11,433.18 — the highest since 16 September.

The Standard & Poor’s 500 index rose 3.4% to 1,194.89, while the Nasdaq composite index rose 3.4% to 2,566.05. Stock markets worldwide were rejuvenated amid signs that Europe was preparing serious steps to provide banks with the capital cushions necessary to withstand a possible debt default by Greece.

German chancellor Angela Merkel and French President Nicolas Sarkozy said Sunday that they would finalize a comprehensive response to the debt crisis by the end of the month, including a plan to make sure European banks have adequate capital.

Investors have been worried that European leaders aren’t moving quickly enough to protect financial institutions in the event of a Greek default.

A default could cause the value of Greek bonds held by European banks to plunge, hurting their balance sheets. US banks would also be affected if Greece goes through a messy default, since they own Greek bonds and also have close ties to European banks.

China’s four biggest state banks soared Tuesday, a day after the government’s investment arm bought their shares in an effort to boost languishing share prices. Central Huijin Investment Ltd., an arm of the sovereign wealth fund China Investment Corp., said Monday that it bought shares in the Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank and that it would continue its market-support operations.

It gave no details about the amount of shares purchased. The banks’ Hong Kong-listed shares showed significant gains. ICBC climbed 7.4%, Agricultural Bank shot up 10.6%, Bank of China gained 8.1% and China Construction Bank added 6.6%.