HONG KONG - ASIAN stocks jumped 4 per cent on Monday on renewed hopes for a bailout of the US automaker industry, improving risk-taking across markets and weighing on the US dollar and Treasuries.

Investors have been funnelling capital back to emerging Asia for the last few weeks and word the White House was considering using some of $700 billion (S$1 trillion) meant to rescue financial institutions for the struggling car manufacturers extended the trend.

Meanwhile, worsening US economic data, a rapidly growing fiscal deficit and the likelihood the Federal Reserve will cut interest rates again this week all combined to push the dollar to a two-month low against the euro.

'The tide seems to have turned around in recent sessions, with bad US economic news now rightfully hurting the US dollar rather than helping it stronger,' said Mr Nizam Idris, currency strategist with UBS in Singapore.

'Further commentary regarding any alternative solutions to the auto sector will be closely followed during the day, and hence be key to risk sentiment,' Mr Idris said in a note.

Oil meanwhile bounced back $1 to trade above $47 a barrel on signs that Opec members are set to make a deep supply cut when they meet later this week, in a bid to prop up prices .

The MSCI index of Asia-Pacific stocks outside Japan rose 4 per cent on the day and is up about 7 per cent so far in December, trying to pull off its first monthly increase since April.

The main attraction in the region throughout this tough year has been China's high growth economy, even though the last few months have seen a severe slowdown.

China-related stock funds have drawn a net $1.48 billion in capital so far this year, the only broad category tracked by Nomura to register inflows.

Japan's Nikkei share average rallied 4.8 per cent, up for four of the last five days. Shares of Honda Motor Corp were up 7.8 per cent, one of the biggest lifts to the index.

The risk of further declines based on earnings downgrades has been clearly outweighed by the cheapness of stocks at the moment. Toyota Motor Co stock is up 7.4 per cent even after Japanese media reported the world's top automaker is likely to further cut its earnings forecasts and report an operating loss of $1.1 billion in the October-March period.

Hong Kong's Hang Seng index rose 3.75 per cent, led by HSBC and China Mobile.

The one dark blot in Hong Kong was Bank of China (Hong Kong) Ltd, which fell 4.5 per cent after the company warned on Friday its 2008 net profits could fall 'considerably'.

The White House indicated last week it is open to using part of the bank bailout package for the Big Three car companies - Chrysler LLC, Ford Motor Co and General Motors Corp. A bill that would have provided $14 billion in loans for the firms failed in the Senate on Friday.

Too early for recovery
With some equity valuations at distressed levels, some investors sitting on cash have begun to think about a recovery at some point in 2009.

However, JPMorgan asset allocation strategists said it might be too early to let go of recession trades given the global economy is smack in the middle of the worst downturn since World War Two.

'There remains sufficient uncertainty about the timing of a recovery that it is quite easy for credit and equities to cheapen further, and bonds to rally more before we start the real recovery trade,' they said in a note. 'We thus stay with a portfolio of recessions trades - long duration in global rates and defensive exposures in credit and equity markets.'

The yen had rallied to a 13-year high against the dollar after the auto bailout initially flopped, but it was steady at 91.09 per dollar on Monday. The dollar fell as low as 88.10 yen on Friday.

KUALA LUMPUR
Malaysian shares closed 0.7 per cent lower on Monday and breached the 850 psychological support due to the absence of positive domestic leads, dealers said.

Dealers said mild bargain hunting by local funds failed to offset selling pressure from retail investors.

The Kuala Lumpur Composite Index shed 5.8 points to close the day at 846.47.

SHANGHAI
Chinese shares closed up 0.52 per cent on Monday, off early highs amid some concerns that Beijing?s pledges to stabilise the stock market may not work, dealers said.

The benchmark Shanghai Composite Index, which covers A and B shares, closed up 10.16 points at 1,964.37 on turnover of 55.2 billion yuan (S$11.9 billion).

The Shanghai A-share index added 10.69 points, or 0.52 per cent, to 2,062.93 on turnover of 55.0 billion yuan, while the Shenzhen A-share index gained 6.06 points, or 0.99 per cent, to 621.02 on turnover of 26.6 billion yuan.

HONG KONG
Hong Kong share prices closed 2.0 per cent higher on Monday on the back of commodity and shipping stocks, but the upside was limited by worries over two major banks, dealers said.

The benchmark Hang Seng Index was 288.56 points higher at 15,046.95.

Turnover was light at HK$42.60 billion (S$8.08 billion).

China Construction Bank bucked the positive trend, on a report Bank of America could sell down its stake. Meanwhile, Bank of China (Hong Kong) also fell after it issued its first-ever profit warning on Friday.

TOKYO
Japan's Nikkei stock index ended up 5.21 per cent on Monday, tracking gains on Wall Street on hopes that the White House will act to stave off the collapse of the ailing Big Three US automakers.

The Nikkei climbed 428.79 points to 8,664.66, shrugging off news of a sharp drop in Japanese business confidence. -- AFP, BERNAMA