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Asian Markets Record Big Gains

October 16, 1998

TOKYO (AP) _ Asia’s top three stock markets enjoyed big gains today, including 7.5 percent jumps in Hong Kong and Singapore, thanks to the unexpected reduction in U.S. interest rates, followed by a surge on Wall Street.

But the dollar took another slide against the yen, which hurts Asian exporters, and some analysts said it won’t take long for local concerns to override the benefits of America’s moves.

``External problems may be eased by the U.S. rate cut, but the problems remain with Japan’s domestic economy,″ said Kenji Karikomi, a general manager at Daiwa Securities in Tokyo.

Across the board Thursday, the United States provided Asia’s rattled and depressed markets with one good sign after another.

For the second time in about two weeks, the U.S. Federal Reserve cut interest rates by a quarter-point. The surprise reductions ignited an explosive rally on Wall Street. The Dow Jones industrial average ended the day up 330.58 points, or 4.2 percent, its third-biggest point gain in history.

American economists also speculated that more rate cuts are imminent as the central bank tries to keep global economic turmoil from dragging the United States into a recession.

In Singapore, the Straits Times Index rose 94.85 points, or 9.2 percent, to close at 1,119.6.

Analysts credited the reduction in U.S. interest rates for lifting the index to its largest percentage gain, and its highest closing level, since February.

In Hong Kong, the blue-chip Hang Seng Index rose 806.59 points, or 8.9 percent, to close at 9,777.01 points, its highest level since May 11.

Investors hoped that the territory’s banks would once again follow the U.S. lead and reduce interest rates, too. And it turned out they were right. Moments after the market closed, banks cut the deposit rate, a key lending rate in Hong Kong.

Property stocks led the index, posting a 13.5 percent gain.

The surge in volume indicated that cash-rich institutional investors are returning to the market, said Howard Gorges, director of South China Securities Ltd. in Hong Kong.

In Tokyo, following three days of declines, the benchmark Nikkei Stock Average of 225 issues gained 285.17 points, or 2.2 percent, to close at 13,280.54.

However, the U.S. currency bought 116.44 yen in late afternoon trading, down 2.29 yen from late Thursday in Tokyo and also below its late New York level of 116.75 yen overnight.

The dollar has fallen sharply against the yen for two weeks, and that hurts exporters by making their products more expensive overseas, and reduces the value of their repatriated earnings.

The success of key exporters such as Sony, Honda and Fujitsu has provided Japan one of the few bright spots in its economy, which is suffering its worst recession since World War II.

Despite the stock surge, traders said the outlook of Tokyo’s bourse remains weak. They said expected declines in corporate earnings and skepticism about new efforts by the government to bail out troubled banks have left investors pessimistic.

``If anything, we expect the market to move downward in the short term,″ said Jason James, a strategist at HSBC James Capel Securities, in Tokyo.

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