Fannie and Freddie nationalisation boosts Asian shares
A pedestrian walks in front of a share prices index board in Tokyo. Photo: YOSHIKAZU TSUNO/AFP/Getty Images
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Asian stocks rallied the most in seven months and Treasuries tumbled as the U.S. government's takeover of Fannie Mae and Freddie Mac boosted confidence that the global economy will weather the subprime mortgage crisis.
The MSCI Asia Pacific Index surged 4 percent to 121.47 as of 1 p.m. in Tokyo, the biggest gain since Jan. 25. Futures on the U.S. Standard & Poor's 500 Index jumped 3 percent. Yields on the benchmark 10-year Treasury note advanced the most in two months. The yen fell the most in seven weeks against the euro as investors favored higher-yielding currencies.
''The markets considered Fannie and Freddie to be in too deep to save themselves,'' said Kwon Hyeuk Boo, head of investment strategy at Daishin Investment Trust Management Co. in Seoul, which has about $2.7 billion in assets. ''The U.S. government has shown its firm intention to fix the problem, and this will help ease the credit crunch.''
The government is taking over Fannie Mae and Freddie Mac after the biggest surge in mortgage defaults in three decades threatened to bring down the companies, which make up almost half of the U.S. home-loan market. A global credit-market slump has caused more than $500 billion of losses and writedowns.
Financial stocks led the surge in Asian equities. The MSCI AC Asia Pacific Financials Index jumped 6.7 percent, poised for its biggest gain since October 1998. Mizuho Financial Group Inc., Japan's biggest bank by assets, and Macquarie Group Ltd., Australia's largest investment bank, rose more than 10 percent. (Bloomberg)
- Richard Frost and Kyung Bok Cho
