(SINGAPORE) The Wall Street-inspired 'relief rally' in Asian stocks continued for a second day yesterday, led by massive gain of 1,356 points or 6.4 per cent in Hong Kong's Hang Seng Index to a two-week high of 22,464.52.

Here, the Straits Times Index rose 72.4 points or 2.5 per cent to 3,000.19 - the highest since it closed at 3,036 on Feb 29.

Yesterday's rise was driven by gains in the banks and the Singapore Exchange. Advances in these four stocks accounted for about half the index's gain.

The rally took the index's two-day gain to 176 points or 6.2 per cent and reduced its 2008 loss to just over 13 per cent, or 10 per cent in US-dollar terms. The Hang Seng's 2008 fall stands at 19 per cent.

Brokers were understandably reluctant yesterday to speak of a permanent reversal, given the failure of several similar bounces this year to take hold.

Most concluded that the absence of fresh bad news from the US lay behind a 'relief rally' - so named because investors are hoping steps the US Federal Reserve has taken to bail out the credit sector will eventually provide relief.

Independent research house BCA Research called Wall Street's recovery a 'playable bounce' in its Monday US Equity Strategy but warned that credit markets have not yet embraced the Fed's efforts to 'normalise risk appetites'.

It concluded that 'nevertheless, there is enough pessimism to err on the side of expecting higher share prices'.

Providing the backdrop yesterday was an overnight rise on Wall Street that came after news that JP Morgan has revised its takeover offer for troubled securities house Bear Stearns from US$2 per share to US$10. European markets yesterday opened about 2.5-3 per cent stronger, although June US futures contracts weakened.

Elsewhere in Asia, markets also closed higher. Japan's Nikkei 225 ended with a 265.13 point or 2.1 per cent rise to 12,745.22, Malaysia's KLSE Composite added 28.93 or 2.4 per cent to finish at 1,229.95 and the Jakarta Composite strengthened 3.4 per cent to 2,419.62.