Asian stocks rise after US rate cut

HONG KONG (AFP) - Most Asian stock markets rose Thursday after another sharp US interest rate cut but Japan's rally aside, gains were modest due to worries that a US economic recession still looms.

The Federal Reserve chopped borrowing costs by 0.50 percentage points to 3.00 percent Wednesday, following an emergency cut last week during a global stocks meltdown, but the latest move failed to excite many Asian markets.

One exception was Japan's bourse, the biggest in Asia, which fell in early trade before rallying to close up 1.85 percent. But Tokyo's Nikkei-225 index remains around seven percent underwater since the start of the year.

Investors fret that Japan's economy will suffer as exports to the ailing US dry up. Official data released Wednesday showed US economic growth had slowed sharply to an annual rate of just 0.6 percent in the last quarter of 2007.

Share price gains elsewhere in Asia were more limited, with the Australian market ending up 0.6 percent after a volatile trading day and Taiwan's bourse closing down 0.3 percent, although South Korea rallied more than two percent.

"We're in an environment where people are completely and utterly lost as to where things are heading in the short term," said Justin Gallagher, the Sydney-based head of sales trading at ABN Amro.

Asia's other major markets were mixed, with Hong Kong falling by early afternoon and Indian shares slipping after the market in Mumbai opened. But mainland Chinese shares were trading higher.

The US rate cut had failed to boost the market because it had been widely expected, said Castor Pang, a strategist at Sun Hung Kai Financial group in Hong Kong.

"Sentiment remained cautious, with investors keeping an eye on upcoming US economic indicators," he said.

Asia's smaller markets were mostly up, with Philippine share prices ending 0.3 percent higher and Malaysian and Indonesian shares both rising during the trading day, although New Zealand closed down.

"Unfortunately, the Fed-triggered rally in US markets was halted half-way by renewed concerns about the credit market," said Choo Swee Kee, the Kuala Lumpur-based chief investment officer of TA Investment Management.

A mortgage default crisis among so-called "subprime" -- or riskier -- US borrowers has ballooned into a global credit crunch threatening a recession in the US and roiling financial markets.

The Federal Reserve slashed borrowing costs by 0.75 percentage points last week to battle the looming slowdown, while US lawmakers have just approved an urgent 157-billion-dollar economic stimulus package.

But despite that analysts and investors remain unconvinced that the measures taken so far will revive the US quickly enough to avert a big slowdown, and Wall Street fell Wednesday despite the Fed's move.

"I think they're trying to keep us out of a recession," said Robert MacIntosh, the chief economist at Eaton Vance Management in the US, after the rate cut. "Whether this is enough or soon enough or too late remains to be seen."

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