HONG KONG (MarketWatch) -- Asian stocks rallied Monday, with strong gains in financials, as investor confidence surged following the U.S. government's decision to put mortgage-finance companies Fannie Mae and Freddie Mac under conservatorship.
Gains were seen across regional share benchmarks - except for Shanghai -- as investors viewed the U.S. move as tonic for the ailing U.S. housing market and instrumental in shoring up confidence in global credit and equity markets
In Tokyo, the Nikkei 225 Average closed 3.4% higher at 12,624.46 while the Topix index advanced 3.9% to 1,216.41.
Australia's S&P/ASX 200 ended 3.9% higher at 5,067.50. In Seoul, the South Korean Composite Index, or Kospi, sprinted 5.1% to 1,476.65, while Taiwan's Taiex claimed the largest gain among regional indexes, rising 5.6% to 6,658.69.
"The market is rallying on this U.S. news; that sets the tone that we might have seen the bottom for now," said Yoji Takeda, a Hong Kong-based fund manager RBC Investment Management (Asia), referring to the Tokyo benchmark.
Shanghai's Composite Index fell 2.7% to 2,143.42, its lowest closing level in 21 months.
Analysts said investors focused instead on Friday's announcement by Chinese securities regulators to allow institutional shareholders of listed companies to issue bonds exchangeable into shares, as part of plan to ease oversupply of stock that fuelled the recent slide in prices.
HSBC analysts headed by Stephen Sun gave the measure a qualified thumbs up. "This could potentially ease oversupply of new shares and attract new fund to the A-share market..." Sun wrote in a research note Monday.
Crude oil for November delivery climbed $1.91 to $108.60 a barrel in electronic trading mid-afternoon in Tokyo. Among precious metals, gold for October delivery surged $16.20 to $815.00 an ounce.
It's estimated more than $17 trillion in global equity value has been wiped out since October as the U.S. housing crisis and recession spread to economies worldwide. Investors had worries that further losses could follow should Fannie (FNM:![]()
FNM 7.04, +0.62, +9.7%) and Freddie (FRE:![]()
FRE, , ) fail. The two companies guarantee almost half the $12 trillion in home-mortgage debt outstanding in the U.S.
Fannie Mae
Last: 7.04+0.62+9.66%
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Under a sweeping plan, the two companies will be run by the U.S. government indefinitely, with the two current chief executives to be replaced and the government investing as much as $100 billion in each firm to keep them solvent. The Treasury said that stock in the company will continue to trade, although powers of stockholders will be suspended until government control ends. Read the article.
"What it's done is eliminated the deep systemic risk," said Macquarie Securities chief economist, research, for William Belchere. "It's had to make people rethink the idea of the boundless recession that seemed to be a possibility as the U.S. worked out from under its problems."
He added the action wouldn't prevent an economic contraction in the U.S. and elsewhere.
Of other regional markets, Hong Kong's Hang Seng Index rallied 4.3% to 20,794.27 and the Hang Seng China Enterprises Index added 4.1% to 11,136.34.
Singapore's Straits Times Index added 4.2%, Malaysia's KLSE Composite added 0.7% New Zealand's NZX-50 added 1.2% and Thailand's SET Index added 2.4%.
Others cautioned that the bailout would provide short-term relief but do little to disperse the gathering storm clouds.
"This is a perfect opportunity to sell into strength," said Jim Walker, managing director of Asianomics Ltd. "It doesn't mean that the recession, that is just getting underway, and the credit contraction with it, is any further along. In fact it's a very clear sign that the economy in the U.S. and elsewhere is in deep, deep trouble."
Japan's biggest banks, among the largest Asian investors in long-term debt issued by Fannie Mae and Freddie Mac, posted doubled-digit gains as investors judged the U.S. government action as a full guarantee on the those holdings.
Shares of Mitsubishi UFG Financial (JP:8306: news, chart, profile) surged 13.3%, while Sumitomo Mitsui Financial Group (JP:8316: news, chart, profile) added 15.2% and Mizuho Financial Group (JP:8411: news, chart, profile) added 12.1%.
Resona Holding's (JP:8308: news, chart, profile) shares leapt 10.7% following an announcement that the bank would buy back as much as110 billion yen of its own shares.
Toyota Motor Corp. (JP:7203: news, chart, profile) (TM:![]()
TM, , ) led export shares higher as the yen weakened to 108.41 to the U.S. dollar from 107.21 yen late Friday in New York.
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Shares of Toyota climbed 4% and Sony Corp. (JP:6758: news, chart, profile) (SNE:![]()
SNE, , ) added 3.9%.
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Shares of Australia's Origin Energy Ltd. (AU:ORG: news, chart, profile) surged more than 12.7% following news that ConocoPhillips (COP:![]()
COP, , ) has agreed to pay as much as $8 billion for a half share in the coal-seam-gas assets of Origin Energy and an associated liquefied-natural-gas project in Queensland, Australia.
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Origin is trying to fend off a hostile $13.8 billion bid from BG Group PLC, and has been holding talks with oil and gas companies about partnerships to develop an LNG plant fueled by its Queensland coal-seam-gas reserves.
Elsewhere in the energy sector, shares of PetroChina (HK:857: news, chart, profile) (PTR:![]()
PTR, , ) were up 3.4%, Cnooc (HK:883: news, chart, profile) (CEO:![]()
CEO, , ) added 3.8% and Woodside Petroleum (AU:WPL: news, chart, profile) (WOPEY:![]()
WOPEY, , ) rose 4%.
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Among Hong Kong-listed financials, shares of HSBC Holdings (HK:5: news, chart, profile) (HBC:![]()
HBC, , ) closed 5.5% higher. Industrial & Commercial Bank of China (HK:1398: news, chart, profile) added 3.7% and Bank of China (HK:3988: news, chart, profile) added 5.5%.
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Shares of Li & Fung (LFUGF:![]()
LFUGF, , ) (HK:494: news, chart, profile) jumped 10.9% after Singapore's state-owned investment fund Temasek agreed to buy a 4.6% stake in the consumer good exporter, which counts Wal-Mart among its customers, for $497 million. 
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.
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