Asia keeps cash flowing to markets despite rally
Asia-Pacific nations kept up their efforts on Friday to shield the region from the fallout of Wall Street upheaval even as stock markets rallied in response to emergency action from the world’s top financial authorities.
Japan and Australia pumped a further $20 billion into their money markets as lending remained tight despite Thursday’s unprecedented $180 billion made available by the U.S. Federal Reserve to the global banking system.
New Zealand relaxed rules on collateral to ease funding conditions and South Korea’s central bank chief promised to act aggressively and supply enough cash to the financial system to calm markets. Bank of Japan Governor Masaaki Shirakawa will brief lawmakers about the authorities’ response to the crisis later on Friday.
The Chinese government was also trying to stabilize markets, buying shares in three of the biggest state-owned banks and ditching a tax on purchases of stocks.
Asian stock markets rallied on Friday taking cue from Wall Street gains overnight following news of a U.S instant payday loan. Treasury plan to create a fund that would mop up toxic debt, similar to one that helped resolve the savings and loan crisis of the late 1980s.
Britain imposed a temporary ban on short selling of financial stocks on Thursday. The Wall Street Journal reported U.S. regulators were considering a similar step and the Securities and Exchange Commission chairman Christopher Cox told reporters he could make a statement on the issue as early as Friday.
Short selling allows investors to profit from falling prices and has helped bring Wall Street icons to their knees.
The plans offered investors a glimmer of hope for resolution to the 13-month old credit crisis that sank Lehman Brothers, stripped Merrill Lynch and Bear Stearns of their independence and triggered a $85 billion bailout of insurer AIG.