HONG KONG - ASIAN stocks edged up, the dollar gained and government bonds fell on Monday after Washington proposed an emergency plan to rescue the top US mortgage finance companies, offering to buy shares if necessary.

The plan was hatched in an attempt to calm investors after Fannie Mae and Freddie Mac stock both plummeted more than 40 per cent last week on spiralling fears that both companies, which are pillars of the housing market, were under capitalised and the credit crisis toppled a fifth US bank.

However, uncertainty more than confidence remained the rule.

Japan's Nikkei share average rose 0.7 per cent, led by semiconductor equipment maker Tokyo Electron.

South Korea's Kospi index climbed 0.6 per cent, with the no. 4 steel maker Posco paving the way higher after the company increased its earnings forecasts last week.

Australia's benchmark index fell 0.4 per cent, weighed by resource-related shares and the financial sector the largest drags.

Shares in Asia-Pacific companies outside of Japan were essentially flat on the day, according to an MSCI index.

The US dollar enjoyed a relief rally on the Fannie and Freddie bailout plan, after slipping 0.8 per cent against a basket of major currencies last week on concerns about the stability of the US financial system.

The euro fell 0.4 per cent to US$1.5890 (S$2.15) and the dollar rose 0.5 per cent to 106.65 yen (S$1.36).

The recovering US dollar knocked down oil prices, which fell more than US$2 to near US$143 a barrel. However, ongoing tension between the West and Iran, the world's fourth largest crude exporter, supported prices.

The longer-term outlook for the dollar, however, was darker, especially if the US federal government is forced to nationalise the so-called government-sponsored entities and load up its balance sheet with their debt.

'The market will remain sceptical that the government won't take full custodianship eventually. Such a development would significantly increase public debt and would be detrimental to US credit ratings,' said Mr Ashley Davies, currency strategist with UBS in Singapore.

'The uncertainty will likely deter foreign reserve managers from acquiring additional US Treasury and agency debt and keep the dollar on the back foot for now,' he said in a note.

Japanese government bond futures fell in tandem with US Treasuries as investors eased back on their holdings of safe-haven debt in reaction to the Fannie and Freddie news.

September JGB futures fell by as much as 0.32 point to 135.67, before recovering some to 135.78, down 0.21 point on the day.

The benchmark 10-year US Treasury yield, which moves in the opposite direction to price, rose to 4.02 per cent, up about six basis points from late Friday in New York.

The timing of the US government's announcement was critical, ahead of a crucial sale of US$3 billion in 3- and 6-month Freddie Mac debt later in the day and coming on the heels of a run on IndyMac Bancorp that caused it to collapse and come under federal control.

KUALA LUMPUR
The Kuala Lumpur Composite Index (KLCI) fell 2.89 points, or 0.25 per cent, to 1,147.5, at the opening.

HONG KONG
At 10.17am SIngapore time, the Hang Seng Index was 0.8 per cent higher at 22,352.88 after opening barely changed.

The China Enterprises Index of top locally-listed Chinese firms gained 1.7 per cent, led by energy and financial stocks.

SHANGHAI
Chinese share prices were higher in Monday morning trade, buoyed by green energy companies after oil prices hit a new record high, dealers said.

Demand was brisk for stocks in companies developing wind and solar power, traders said, after oil prices rose to US$147.27 a barrel overnight in New York before settling at US$145.08.

But analysts said the key index was likely to resume its slide in the next few days as cautious investors await the release of China's June inflation data on Thursday.

Oil refiners and airlines were under pressure as rising fuel costs threatened to squeeze their profits. Chinese refiners must sell at government-set prices regardless of whether their costs increase.

The benchmark Shanghai Composite Index, which covers A and B shares, edged up 13.17 points, or 0.46 per cent, at 2,869.80 at 10.22am Singapore time.

The Shanghai A-share index was up 13.85 points, or 0.46 per cent, to 3,010.13, while the Shenzhen A-share index rose 5.96 points, or 0.66 per cent, to 907.89.

TOKYO
The Nikkei stock average rose 1.1 per cent on Monday, led higher by bank stocks on investor relief after the US government unveiled measures to help troubled home financing providers.

Japan's top lender Mitsubishi UFJ Financial Group and other banks rose sharply after the US Treasury and Federal Reserve unveiled sweeping steps to support Fannie Mae and Freddie Mac if needed to bolster confidence in the troubled mortgage financing giants.

The benchmark Nikkei ended the morning up 146.21 points at 13,185.90. The broader Topix gained 1.3 per cent to 1,302.79. -- REUTERS