Washington: Stock markets across Asia rallied on Monday as the US government took over sick mortgage lenders – Fannie Mae and Freddie Mac – to put a new life into the global financial crisis.
The Tokyo and Hong Kong markets rose more than three per cent as investors cheered Sunday's dramatic move in Washington aimed at shoring up the troubled US housing market.
However, a fund manager at Aberdeen Asset Management in Singapore, Scott Bennett, said, "What you have is the US government not putting in immediate cash, but putting its credibility on the line. It's a tremendous help, but it doesn't solve all the problems."
He added, "This news will likely be displaced going forward by other credit negative news. I still remain cautious."
China and Japan, the biggest buyers of Freddie Mac and Fannie Mae bonds, praised Washington for its rescue of the ailing mortgage giants, but investors harboured no illusions the bailout would end the global credit market misery.
As battered financial stocks rallied and investors moved out of cash and safe-haven bonds, analysts cautioned that the bailout announced on Sunday was more a sign of the perilous state of the global financial system than of an imminent recovery.
Earlier, the US government on Sunday seized control of mortgage finance companies Fannie Mae and Freddie Mac, launching what could be its biggest bailout ever to support the US housing market and ward off more global financial market turbulence.
The action, prompted by worries over the companies' shrinking capital, was the latest in a series of emergency steps taken by US authorities to quell what is now a year-long credit market crisis that has helped push many economies towards recession.
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