Asian stocks up on dip-buying; caution remains

HONG KONG—Asian markets rebounded on bargain-buying Tuesday following recent heavy selling caused by the eurozone crisis, but traders remained cautious after mixed messages from EU leaders, analysts said.

The region’s gains followed rallies in European markets and on Wall Street Monday after reports filtered through that a plan was emerging to stem a crisis that US President Barack Obama said was “scaring the world.”

Tokyo closed 2.82 percent, or 235.82 points, higher at 8,609.95, while Sydney jumped 3.64 percent, or 140.7 points, to 4,004.6, and Seoul soared 5.02 percent, or 83.00 points, to 1,735.71.

Hong Kong surged 4.15 percent, or 722.75 points, to 18,130.55, while Shanghai added 0.91 percent, or 21.87 points, to close at 2,415.05.

Jakarta, which lost more than 11 percent in the previous two sessions, clawed back some of those losses, to end 4.76 percent higher, adding 157.80 points to 3,473.93.

And Bangkok, which lost around 13 percent in the previous three sessions, closed 4.71 percent, or 42.56 points, higher at 946.62.

But Kazuhiro Takahashi, general manager of investment strategy and research at Daiwa Securities, said: “We’ve experienced this type of temporary rebound many times before, with markets coming up for air after days of brutal selling, and this will likely again be a short break before we see more evidence of progress in the Greek debt crisis.”

As European markets opened, eyes turned to a meeting later in the day between between German Chancellor Angela Merkel and Greek Prime Minister George Papandreou that is expected to discuss a way forward for indebted Athens.

Global stocks have slumped over recent weeks as European leaders dither over the best way to tackle the sovereign debt problem while Greece verges on a bankruptcy that many fear could lead to another financial crisis.

Investors moved in to buy cheap shares Tuesday as a report emerged that European officials were actively developing a plan to use funds for the eurozone bailout facility to shore up financially strapped European banks.

There was also talk that a 50-percent “orderly” haircut for Athens’ creditors will now be required to make a difference.

Adding to that was speculation that France was drawing up plans to re-capitalize the country’s ailing banks amid persistent worries over their exposure to Greece.

The news lifted European and US stocks. On Wall Street the Dow jumped 2.53 percent, the S&P 500 added 2.33 percent and the Nasdaq Composite rose 1.35 percent.

And in Europe London’s FTSE-100 gained 0.45 percent, the Paris CAC 40 added 1.75 percent and Frankfurt’s DAX was 2.87 percent up.

However, adding to a sense of disarray in the bloc, Germany Monday shot down moves to boost the 440-billion-euro ($590 billion) European Financial Stability Facility (EFSF) after EU economic affairs commissioner Olli Rehn said it should be given “greater strength.”

Within hours, German Finance Minister Wolfgang Schaeuble insisted there was no plan to boost the fund’s actual size.

“We are giving it the tools so it can work if necessary,” Schaeuble said, referring to the new powers allowing the fund to lend to countries such as Italy even before they hit cashflow crises.

“Then we will use it effectively — but we do not have the intention of boosting its volume.”

His blunt put-down came as Merkel faces a crunch vote on Thursday to ratify the EFSF in the German parliament, which is expected to be tight. Germany is by far the biggest provider to the fund.

Obama later warned that the debt crisis was getting out of hand in the face of fears of another worldwide recession.

Europe “never fully dealt with all the challenges that their banking system faced,” Obama said late Monday.

“It’s now being compounded with what’s happening in Greece,” he added. “So they’re going through a financial crisis that is scaring the world.”

Chris Gore, currency analyst at GOMarkets in Melbourne, told Dow Jones Newswires: “The general sense of impending doom will likely remain the primary theme as European leaders struggle to build a consensus on the right course of action to avoid a full-scale crisis.”

And Sebastien Barbe, strategist at Credit Agricole, warned in a note to clients: “If Europe sorts out its fiscal problems soon, there is still time for markets to recover fast enough to prevent major economic damage to emerging economies.

“However, if the crisis drags on for several more months, significant impact on economic activity and further losses in asset prices are likely.”

The euro edged down slightly to $1.3510, from $1.3538 late Monday in New York, and was at 103.28 yen from 103.30 yen.

The dollar was down at 76.41 yen against 76.42 yen.

On oil markets New York’s main contract, light sweet crude for delivery in November, surged $1.41 to $81.65 per barrel in the afternoon.

Brent North Sea crude for November delivery rose $1.15 to $105.09.

Gold was at $1,653.85 an ounce by 0800 GMT, up from the $1,599.98 it was at by 0800 GMT Monday.

In other markets:

— Singapore closed 2.70 percent, or 71.60 points, higher at 2,725.91.

Singapore Telecom was up 1.62 percent at Sg$3.14 and property developer CapitaLand advanced 2.82 percent to Sg$2.55.

— Mumbai jumped 2.95 percent, or 472.93 points, to 16,524.03.

India’s top property firm DLF rose 8.46 percent to 217.35 rupees while leading vehicle maker Tata Motors jumped 5.92 percent to 155.7 rupees and energy giant Reliance Industries rose 5.09 percent to 797.85 rupees.

— Taipei soared 3.09 percent, or 212.83 points, to 7,089.95.

Taiwan Semiconductor Manufacturing Co gained 4.02 percent to Tw$69.9 while design house MediaTek was 7.0 percent to the good at Tw$327.0.

— Wellington closed 1.15 percent, or 37.56 points, higher at 3,292.83.

Telecom rose 3.0 percent to NZ$2.575 and Fletcher Building was up 2.4 percent at NZ$7.57.

— Kuala Lumpur closed 2.43 percent, or 32.40 points, higher at 1,364.20.

Malayan Banking gained 4.79 percent to 7.87 ringgit and gaming giant Genting inched up 0.92 percent to 3.28 ringgit. Communications service provider Maxis fell 0.19 percent to 5.23 ringgit.

— Manila’s stock market was closed due to Typhoon Nesat (local name: Pedring).