Asian equities rise impressively

Major indices jump on Fannie Mae and Freddie Mac bailout

Asian equity markets performed largely on the positive side today, with the key indices in Japan, India and Hong Kong logging gains in a range of 3-4% as the global financial markets witnessed one of the biggest government bailout in U.S. history in the form of home mortgage giants Fannie Mae and Freddie Mac. The Chinese equity markets remained a notable exception to the across the board gains though as concerns over the financial health of the central bank along with fears that the economy would lose momentum in near term on slowing demand in key industries played a key role.

Meanwhile, the US Treasury said Sunday that regulators are seizing control of home mortgage giants Fannie Mae and Freddie Mac. Under a sweeping plan, the two companies will be run by the government indefinitely, with the two current chief executives to be replaced and the government investing up to $100 billion in each firm to keep them solvent. In order to improve the availability of mortgages, Treasury will start buying Freddie and Fannie's mortgaged-backed debt in the open market. The companies will also end all lobbying of the government and eliminate dividends.

Together, Fannie Mae and Freddie Mac form the cornerstones of the U.S. mortgage market and own or guarantee almost half the home loans in the country's roughly $12 trillion mortgage market. Over the past year, the companies have recorded combined losses of around $14 billion.

This signaled to the market participants that the housing led turmoil in the US and global credit markets might be nearing its end. With one of the largest entities in the housing markets being seized by the US government, the message that is sent to the market participants is that the worst may be over for the US housing crisis, that has spooked th global investors for last one and half years.

The Nikkei 225 ended at 12624.46 points, adding 3.38% while TOPIX also added about 4%. Hang send ended up 4.32% to close at 20794.27 points while Korea’s KOSPI added more than 5% to close at 1476.65. India’s BSE SENSEX ended up 3.18% at 14944.97. However, China stayed lower, adding to the recent spate of losses with the CSI 300 index ending at 2126.52, down 2.61%.

Meanwhile, US Dollar resumed its uptrend today as traders once again acted in a firm belief that the US currency is headed for further gains in the near term as softening global commodity prices are seen assisting the US economy.

This could be particularly true in an environment, which can turn congenial for the world’s largest economy as the Fed’s policy of ultra low interest rates begins to make its presence felt. The dollar’s ride was a little erratic today though as the early Asian trading saw the greenback trade well above 1.4400 due to an upshot in crude oil prices.

The US dollar added about 200 pips in less than four hours, hitting a high of 1.4170 per Euro.