Bulls charged back with a vengeance after United States President Donald Trump talked up the prospects of a deal with Beijing that could potentially ease the US-China trade war.
Hong Kong rallied 4.21 per cent, lifting the rest of North Asia and South-east Asia. The Straits Times Index continued to recover from a 22-month low of 2,966.45 on Oct 30, climbing as much as 2 per cent before finishing 1.81 per cent higher yesterday.
Even China's yuan pulled back from the brink of the 7-per-US dollar level, which was last registered during the global financial crisis in 2008. The yuan strengthened to 6.8823 against the greenback yesterday, after hitting a 10-year low of 6.9725 on Wednesday.
President Trump hinted at the prospects of a trade deal follo-wing a "long and very good" phone conversation with Chinese President Xi Jinping, and tweeted that their discussions were "moving along nicely".
This was followed by news that Mr Trump had asked US Cabinet officials to draft a possible trade deal with China ahead of the Group of 20 (G-20) summit later this month in Argentina.
But some analysts see this as a ploy by the Trump administration to boost market sentiment ahead of the US midterm elections on Tuesday.
Remisier Chung Chun He believes the rebound "may last until after the midterms, but sentiment is still cautious as long as the trade war issue remains unresolved".
Mr Jameel Ahmad, global head of currency strategy and market research at FXTM, said that a po-tential breakthrough would be "welcome news for investors and financial markets globally because the threat of a trade war has been viewed as the largest risk to the world economy since the global financial crisis".
Traders are repositioning for a possible stronger-than-expected rally ahead of the G-20 summit, said UOB Kay Hian head of research Andrew Chow.
"The Trump news is a game changer for traders today, but it could reverse depending on how the midterm elections pan out," he added.
Bargain hunters snapped up banks, blue-chip property stocks and even component suppliers to US tech giant Apple. Hi-P International, which makes phone covers for Apple, jumped 12.6 per cent, or 9.5 cents to 85 cents.
Meanwhile, traders are on standby for the results of the midterm elections, which will likely be around midday on Wednesday in Asia.
"Up for contest will be all seats of the House of Representatives, signalling a potential change of control. In what could be re-garded as an upset result - the giving up of the House to the Democrats in the US' bipartisan system - the expectations will be for more legislative gridlock," IG analyst Pan Jingyi said.
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