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Asia Markets Respond Positively to US Plan

Share markets in Asia extended recent rises as investors rode the optimism triggered by Wall Street's price gains on the U.S.-government plan to rescue banks from billions of dollars of risky mortgage debt. Ron Corben has this report from Bangkok.

Share prices surged across Asia, driven by the U.S. government's proposal to buy $700 billion of bad bank assets in a bid to reverse the hemorrhaging of financial markets during the past week.

The gains in prices were led by financial and commodity shares as indices continued the rally evident in the final two days of last week after central banks initially poured in over $220 billion into nervous credit and capital markets.

The U.S. government is looking for congressional approval to use $700 billion to take over bad debts from the U.S. banks. The slide in market confidence last week was triggered by the collapse of investment bank Lehman Brothers and an $85 billion U.S. government rescue of international insurer, American International Group.

Japan's Nikkei 225 stock average gained almost 1.5 percent, while the Australian share index jumped 4.5 percent and Taiwan's benchmark gained 2.3 percent.

Authorities in Australia and Taiwan followed leads set in the United States and Britain and other countries by restricting the practice of short selling - where investors bet on the share prices being likely to fall further.

But the chief economist at Thailand's Phatra Securities, Suphavud Saicheua, says while limits on share selling supported some markets, the key factor was the U.S. government's proposed $700 billion banking sector rescue package.

"The more important [driver] is the introduction of this new legislation - that will enable the [U.S.] Federal Government to buy up to $700 billion of impaired assets - and would put a floor on asset prices and presumably make sure the U.S. financial system continued to function," said Suphavud.

Suphavud said generally authorities had still not solved the problems affecting the financial systems, but the policies would now boost confidence in the U.S. financial system.

Regional analysts said steps taken by China's government to support the local market, including plans to buy shares in major state-owned banks and tax cuts to boost share trading, had also boosted share prices in Shanghai and Hong Kong. The Shanghai index rose more than six percent.

Analysts say the Asia markets still hold some concerns over the details of the U.S. rescue plans and fears over the health of other financial firms in the coming days.

Reports Monday said that since the beginning of 2007, global financial companies had reported more than $510 billion in credit losses and write-downs tied to the recession in the U.S. housing market and slower economic growth.