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Wall Street Recovery Fuels Asia

September 2, 1998

TOKYO (AP) _ Wall Street’s dramatic turnaround from big losses to a big gain sent Asia’s three main stock indexes opening higher today, despite the region’s ongoing economic woes.

In Tokyo, the 225-issue Nikkei Stock Average rose 103.65 points, or 0.72 percent, to end the morning session at 14,473.28.

If the gains continue, it could be the third straight day of improvement in the benchmark, which had hit a 12-year low on Friday.

In Singapore, where the stock market has undergone one bad day after another lately, the Straits Times Index climbed 1.1 percent, or 8.91 points, to 832.24, soon after trading opened.

Dealers credited the early gains to Wall Street’s turnaround. The Dow Jones industrial average closed up 288.36 points, or 3.8 percent, after Tuesday trading, recouping much of Monday’s 512-point loss. The Dow closed at 7,827.43 on Tuesday.

In Hong Kong, the blue-chip Hang Seng Index jumped 313.22 points, or 4.4 percent, to 7,375.69 in early trading, as investors bought back shares they had sold last week when a government buying spree pushed share prices up, said Josephine Hui, a research director at Celestial Asia Securities.

The index had slumped 2.9 percent Tuesday and 7.1 percent Monday, the day the government took a breather from its efforts to step in and discourage speculators in the market.

The news from Wall Street and Russia, where President Clinton was meeting with beleaguered President Boris Yeltsin, was one of several factors effecting the Hong Kong market, Hui said.

Russia is battling the collapse of its currency and stock markets, as well as political uncertainty.

Given how long Asia’s financial crisis has battered its stock and currency markets, it was hard to imagine that Wall Street’s one-day recovery would be any more than a respite in Asia.

However, Monday’s drop on the Dow had raised concerns in Asia about whether the region’s 14-month financial crisis had spread to the West, especially Russia.

Just before Tuesday’s rebound on Wall Street, an editorial appearing in Japan’s Yomiuri newspaper had warned readers:

``It is even possible that the plunging markets could trigger a global depression, which would in turn throw the entire international economic system into chaos.″

Today’s trading on the Nikkei also could benefit from some good news about Japan’s efforts to revive its economy, the second largest in the world and a crucial factor in Asia’s future.

For weeks, a stalemate in parliament has been preventing the administration of Japan’s new prime minister, Keizo Obuchi, from using taxpayer money to prop up Japan’s troubled banks.

But today, Naoto Kan, head of the country’s largest opposition party, reportedly indicated that he has dropped his opposition to the bailout plan.

Uncertainty over the fate of the legislation _ and the entire banking system _ has unnerved investors both in Japan and abroad.

Update hourly