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Asian stock markets rallied on Wednesday after the US Federal Reserve slashed key interest rate by 0.75 percentage point on Tuesday night and hinted at more cuts to come.
But the rebound turned out to be V-shaped in many regional bourses, as investors vacillated between relief and disbelief that the turmoil, engulfing Asian financial markets since the start of the year, may be subsiding finally.
In Singapore, the benchmark Straits Times Index opened an eye-popping 104 points up - after slipping by as much as 390 points in the past two days - only to lose 15 points just before the mid-day break, as a sudden selling spree on heavyweights such as DBS Group Holdings, Singapore Airlines and SingTel sent the market reeling.
But Hong Kong's sharp recovery, as its gains almost doubled to 2332 points after the lunch-break, lured bargain-hunters back into the market in force.
At 4 pm on Wednesday, STI has risen 136.2 points, or 4.6 per cent, to 3002.55.
What is spurring the renewed buying interest is a hope that the Fed will again cut interest rates again at its rates-fixing meeting next week.
Goldman Sachs's chief US economist, Jim O'Neil, for one, believed that the Fed will follow up with a 0.5-percentage point cut next Wednesday (jan30), if it wants to stay 'ahead of the curve'.
For the traumatised traders here, the latest Fed rates cut is proving to be the best Chinese New Year boon, as they struggle to return back to normal, after being hit by numerous margin-calls in the past two weeks.
'The rates cut will trigger a much needed Chinese New Year rally,' said a dealer.
But some analysts believe that Asian stock markets are hardly out of the woods yet.
'We can't emphasise enought that the growing credit pandemic is global, and not restricted to the United States or to developed markets. The infection is also beginning to hit emerging markets,' said Merrill Lynch's chief investment strategist, Richard Bernstein.
One clear indicator of slowing Asian growth is the 30-per cent plunge of the Baltic Dry Index - tracking commodities shipping costs - since end-December.
'Some observers have connected the Baltic Dry Index's downfall to a yet to be recognised slowdown in Asian economic growth,' he added.
But for now, Mr Bernstein's worries are temporarily forgotten as blue-chips enjoyed their biggest one-day rally this year.
Among the gainers are DBS Group Holdings which rose 38 cents to $17.88, the Singapore Exchange which gained 57 cents to $9.27 and property giant City Developments which jumped $1.04 to $11.86.
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