Asian stock markets leap higher on China stimulus plan

HONG KONG -- Asian stock markets gained strongly Monday, with Shanghai's index spiking more than 7%, as investors welcomed China's $586 billion stimulus plan aimed at countering the effects of a global slowdown on its economy. European markets opened higher.

Tokyo's Nikkei 225 stock average surged 498.43 points, or 5.8%, to 9,081.43, buoyed also by a weakening yen. Hong Kong's Hang Seng Index gained 501.20 points, or 3.5%, to 14,744.63, though traded well off its highs.

In mainland China, where the benchmark Shanghai Composite Index has fallen by more than two-thirds since peaking last October, the index soared 7.3% to 1,874.80. Markets in India, Australia, Singapore and South Korea joined the region's advance.

On Sunday, China unveiled a massive $586 billion stimulus package in hopes of keeping economic growth from falling too fast. Demand from the U.S. and the country's other vital export markets has been waning as the global financial crisis takes an economic toll.

China's economic growth slowed to 9% in the third quarter, the lowest level in five years and a sharp decline from 11.9% the year before — perilously low for a government that needs to create jobs for millions of new workers and for other Asian countries that have come to depend heavily on Chinese demand.

"The global economy is in trouble and Chinese authorities understand that they can't wait anymore ... They're aware that exports next year will be terrible given the weakening economies in the U.S. and Europe," said Winson Fong, a Hong Kong-based managing director at SG Asset Management, which oversees about $3 billion in equities in Asia.

"This has been overdue," he said. "Investors in mainland China have been waiting for a complete rescue package since the beginning of the year."

China's announcement came as economic officials from 20 leading nations called Sunday for increased government spending to boost the troubled global economy.

At a meeting in Brazil, finance ministers and central bank presidents from the Group of 20, which includes major wealthy and developing nations, also said emerging economies deserve a prominent role in talks to overhaul the world financial system.

The markets got an added boost from Wall Street, where the major indexes gained Friday despite news that U.S. employers cut 240,000 jobs in October, pushing the jobless rate to a 14-year high of 6.5%. The Dow Jones industrial average rose 248.02, or 2.85%, to 8,943.81.

U.S. stock index futures were up, suggesting New York trading would open higher. Dow futures were up 139 points, or 1.6%, to 9,136.

China's stimulus plan — a mix of spending, subsidies, looser credit policies and tax cuts that will benefit low-cost housing, rural infrastructure, power grids, social welfare programs and other areas — lifted shares across most sectors.

"You can imagine how excited investors are after seeing their long-term expectations become reality," said Gao Lingzhi, a strategist at Great Wall Securities in Shenzhen.

Property, resource and financial plays were among the biggest gainers, although energy firms also advanced. Top cement maker Anhui Conch and leading steel producer Baoshan Iron & Steel both spiked the daily maximum of 10% in mainland trade on expectations of new construction spending.

In Hong Kong, No. 2 steel maker Angang Steel exploded 28% and China Railway climbed almost 22%.

Commodity firms helped lead Australia's market higher on hopes a wave of Chinese building as a result of the stimulus measures would underpin demand for resources. BHP Billiton, the world's largest mining company, added 7%, and Rio Tinto advanced almost 8%.

Australian shares also were helped by speculation that the country's central bank would cut interest rates further after it lowered its forecasts for economic growth over the next two years.

In Japan, Sony rose 7.6% and fellow electronics heavyweight Sharp Corp. was up 7.3%. Mitsubish Heavy Industries gained 6.3% to 391 yen.

Investors shrugged off bad news about capital investment in Japan, where core machinery orders dropped a record-tying 10.4% in the third quarter.

The dollar strengthened to 99.02 yen, up from 98.21 late Friday in New York.

Oil prices rose in tandem with the region's markets, with a barrel of light, sweet crude for December delivery gaining $2.87 to $63.91 in Asian trade. The contract settled at $61.04, up 27 cents, in Friday trade on the New York Mercantile Exchange.

AP reporters Elaine Kurtenbach in Shanghai and Shino Yuasa in Tokyo contributed to this report.