Wall St gains boost Japanese stocks

Japanese stocks have rebounded from an historic fall in the previous session as positive sentiment regained some momentum following strong overnight gains on Wall Street.

Japan’s benchmark Nikkei 225 stock average closed today’s morning session up 129.66 points, or 1.53%, at 8,588.11. The broader Topix index added 2.39% to 885.17.

The Nikkei was up more than 3% at one point but pared gains as the morning progressed.

The rise followed yet another volatile session on Wall Street, where a late surge pushed the Dow Jones industrials up 4.7%, or 400 points, after falling 380 points in the opening minutes of trading.

Utilities, metal and communications issues led gains, with Nippon Telegraph and Telephone Corp. up nearly 7%.

Meanwhile, Malaysia said it will guarantee all bank deposits for the next two years, following similar moves by Hong Kong and Singapore amid fears that banks may collapse in the global financial crisis.

The central bank, Bank Negara Malaysia, and the finance ministry announced late last night in a statement that the government will fully guarantee all ringgit and foreign currency deposits with commercial, Islamic and investment banks - either local or foreign – until December 2010.

“These measures are pre-emptive and precautionary since Malaysian financial institutions are well-capitalised with ample liquidity, and confidence of depositors remains intact,” the statement said.

The move is in line with other regional markets such as Singapore and Hong Kong, which have vouched for bank deposits.

Singapore said yesterday it will guarantee 150 billion Singapore dollars (€75bn) of bank deposits for more than two years after regional finance rival Hong Kong moved to protect its deposits earlier this week.

The government committed the reserves to guarantee all local and foreign currency deposits of individual and nonbank customers of banks, financial companies and merchant banks until December 31, 2010, the finance ministry and central bank said in a joint statement.

“The announcement by a few jurisdictions in the region of government guarantees for bank deposits has set off a dynamic that puts pressure on other jurisdictions,” the statement said.

“This is why although Singapore’s banking system continues to be sound, the government has decided to take precautionary action to avoid an erosion of banks’ deposit base.”

The Hong Kong Monetary Authority said on Tuesday it will use exchange fund reserves to guarantee bank deposits until 2010, regardless of the amount.

Singapore had not taken any exceptional measures since turmoil in world financial markets worsened over the last few months. Weakening demand for the city-state’s exports led to a 0.5 % contraction of the economy in the third quarter.

Governments and central banks worldwide have cut interest rates and injected huge amounts of liquidity to prop up their economies.

The central bank said it would guarantee interbank obligations at banking institutions and facilitate access to capital “should there be any further destabilising consequences from external developments”.

Malaysian government leaders have insisted the country will not slip into recession, citing its strong reserves, trade surplus and savings.

Finance minister Najib Razak earlier this week said Malaysia can still grow 5% this year but the government may need to revise its 2009 forecast. He has said he would announce a “stabilisation plan” on Monday.

But the Malaysian Institute of Economic Research, an influential private think tank, cut its 2009 economic growth forecast Thursday to 3.4% – much lower than its earlier forecast of 5% and the government’s current 5.4%.

The institute also warned of a possible recession if the US economy tumbles further.