HONG KONG - MOST Asian stock markets extended their New Year's rally on Wednesday, with Japan's index up nearly 2 per cent, on hopes that stimulus measures from a new US administration would help speed the world's economic recovery.

The yen continued to lose ground against the dollar, buoying shares in Japanese exporters, and crude oil prices dipped modestly after briefly rising above US$50 (S$73.65) a barrel overnight, their highest point since Dec 1.

Casting a shadow on the region, markets in India and Hong Kong fell sharply. In India, the chairman of heavyweight tech firm Satyam Computer Services Ltd. quit after admitting the company's profits had been inflated for several years. Meanwhile, Bank of America Corp. sold part of its stake in No. 2 lender China Construction Bank Ltd. for US$2.8 billion to raise cash to cope with economic turmoil.

Still, since falling to multiyear lows in November, global equities have advanced strongly, with a number of major benchmarks rising more than 10 per cent to year-end.

Many markets have shown few signs of slowing in 2009, as investors poured money back into riskier assets, such as emerging market stocks, amid speculation that government policies will help bring an end to the global slump later this year.

In recent days, buying sentiment has been supported by US President-elect Barack Obama's proposals to revive the world's largest economy with spending and tax measures that could cost as much as US$775 billion. Overnight, Obama said the US could face trillion-dollar deficits for years to come as it moves ahead with its massive stimulus spending.

However, with company earnings expected to be dire in the coming months, the 'Obama effect' could be short-lived, said Mr Peter Lai, investment manager at DBS Vickers in Hong Kong.

'After the honeymoon period of Mr Obama wears off, people will realise the cruel reality of the economic slowdown and the credit crisis,' Mr Lai said.

Tokyo's Nikkei 225 stock average rose 158.40 points, or 1.7 per cent, to 9,239.24, as the weakening yen led investors to buy exporters. Honda Motor Co., Japan's No. 2 carmaker, jumped 13.5 per cent, Nikon Corp. soared 15.9 per cent and Sony Corp. added 9.4 per cent.

Elsewhere, South Korea's Kospi gained 2.8 per cent to 1,228.17, while benchmarks in Australia, Taiwan and the Philippines were higher by about 1 per cent or more.

In Hong Kong, the Hang Seng Index tumbled 3.4 per cent to 14,987.46, while India's Sensex tanked 7.5 per cent on news about Satyam, whose shares plummeted 80 per cent.

Overnight in New York, Wall Street again brushed off more dismal readings about the US economy. Pending home sales fell to the lowest level on record in November, while November factory orders dropped nearly twice as much as economists had expected.

The Dow Jones industrial average gained 62.21, or 0.7 per cent, to 9,015.10. Broader stock indicators showed steeper advances to end at their highest levels since Nov. 5. The Standard & Poor's 500 index rose 7.25, or 0.8 per cent, to 934.70.

US futures eased modestly, pointing to a soft open on Wall Street. Dow futures were down 77 points, or 0.9 per cent, at 8,873 and S&P500 futures fell 6.8 points, or 0.7 per cent, to 923.40.

Oil prices were lower, with light, sweet crude for February delivery down 66 cents at US$47.92 a barrel in Asian trade. Overnight, the contract fell 23 cents to settle at US$48.58 a barrel after prices at one point reached US$50.47.

In currencies, the dollar rose to 93.45 yen, up 0.07 per cent from 93.38 yen. The euro was higher at US$1.3577.

TOKYO
Japanese stocks closed up 1.74 per cent on Wednesday at a fresh two-month high, extending a winning streak to a seventh day thanks to overnight gains on Wall Street and a weaker yen.

The benchmark Nikkei-225 index climbed 158.40 points to 9,239.24, the highest close since Nov 5. The broader Topix index of all first-section shares rose 12.05 points, or 1.38 per cent, to 888.25.

HONG KONG
Hong Kong share prices closed 3.4 per cent lower on Wednesday, as China telecoms and banking stocks pulled down the main bourse, dealers said.

The benchmark Hang Seng Index closed down 522.05 points at 14,987.46.

Turnover was much higher than recent sessions at 90.02 billion Hong Kong dollars (S$16.9 billion).

SHANGHAI
Chinese shares closed down 0.68 per cent on Wednesday as telecom shares retreated on profit-taking following news that China issued third-generation mobile phone licences, dealers said.

Banks also declined after China Construction Bank, or CCB, confirmed that Bank of America planned to sell 5.62 billion of CCB's H-shares at a discount.

The benchmark Shanghai Composite Index, which covers A and B shares, closed down 13.13 points at 1,924.01 on turnover of 63.9 billion yuan (S$13.8 billion).

The Shanghai A-share index fell 13.85 points, or 0.68 per cent, to 2,020.11 on turnover of 63.7 billion yuan, while the Shenzhen A-share index shed 1.74 points, or 0.28 per cent, to 614.50 on turnover of 33.6 billion yuan.

KUALA LUMPUR
Malaysian shares rose 0.6 per cent on Wednesday, as a rally that began in the opening sessions of the new year began to dwindle, dealers said.

The Kuala Lumpur Composite Index gained 5.39 points to close at 927.62. Decliners outnumbered advancing stocks 306 to 228.

'The KLCI has climbed some 6.8 per cent over the last four trading days partly as a result of the 'January' effect,' a dealer told Dow Jones Newswires.

'Profit-taking so far has been relatively muted, suggesting there may be more upside to this rally,' he said.

The dealer also said plantation stocks may lead the market higher in coming days to around the 950 level.

Among leading stocks, Bumiputra-Commerce was up 7.7 per cent at 7.00 ringgit, KL Kepong rose 4.0 per cent to 10.40 ringgit and Parkson lost 16.4 per cent to 3.58 ringgit. AFP, BERNAMA, AP