Asian Stocks Gain for Second Day on Bank Bailouts; Nikkei Jumps

By Chua Kong Ho and Chan Tien Hin

Oct. 14 (Bloomberg) -- Asian stocks surged, driving Japan's Nikkei 225 Stock Average to its biggest gain in 18 years, after the U.S. and European governments agreed to buy stakes in banks.

U.S. futures rose and the dollar advanced against the yen, while Treasuries fell. The Nikkei jumped 12.3 percent, rebounding from its worst week on record. Japanese markets were shut for a holiday yesterday. Sony Corp., Sumitomo Mitsui Financial Group Inc. and Toyota Motor Corp. all soared more than 14 percent. National Australia Bank Ltd. added 9.6 percent in Sydney and Woori Finance Holdings Co. rose 11 percent in Seoul as people briefed on the matter said the U.S. will buy stakes in nine banks.

Governments are ``tackling the root of the problem,'' said Christopher Wong, who helps manage about $25 billion in assets as investment manager at Aberdeen Asset Management Asia Ltd. in Singapore. ``They're putting confidence back into the market by not just adding liquidity but adding strength to the banks that serve main street.''

The MSCI Asia Pacific Index rose 6.7 percent to 94.61 as of 10:11 a.m. in Tokyo, poised for its biggest advance since 1998. Australia's S&P/ASX 200 gained 5.9 percent, the most since October 1997, and extending yesterday's 5.5 percent climb. South Korea's Kospi Index jumped 5.6 percent, bringing its two-day gain to 9.5 percent.

U.S. stocks staged the largest rally yesterday in seven decades. The Standard & Poor's 500 Index rebounded from its worst week in 75 years with an 11.6 percent advance, its steepest since 1939. S&P 500 futures gained 1.9 percent.

Governments across the globe stepped up measures to support banks after global stock markets lost $7 trillion of their value last week, driving the MSCI World Index down 20 percent.

The Bush administration will announce a plan that includes spending about half of a total of $250 billion for stakes in nine banks including Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley, said the people.

France, Germany, Spain, the Netherlands and Austria have committed $1.8 trillion to guarantee bank loans and take stakes in lenders. The U.K. agreed to invest 37 billion pounds ($64 billion) in banks including Royal Bank of Scotland Group Plc.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net