Stock markets in Asia have regained some of their recent losses following a rally in New York.

After sharp falls on Monday on the Hong Kong stock exchange, the Hang Seng index rose by 5% on Tuesday morning. It later extended the gains to trade 7.36% higher at 8,718.

In other parts of Asia, the Singapore and Jakarta stock markets rose, but dealers said Tokyo stocks failed to post substantial gains, reflecting underlying pessimism about Japan.

The UK's FTSE 100 index was seen bouncing up in early trading on Tuesday.

Hong Kong's rally came despite fears that there would be a further rapid decline as a result of the collapse on Monday of the big Hong Kong investment bank, Peregrine. The bank is being formally liquidated on Tuesday.

However, the BBC Hong Kong correspondent says the damage to economic confidence is not likely to be repaired quickly.

Several analysts are predicting further stock market falls in the coming days. They say pressure is building for a downgrading in the value of the Hong Kong dollar relative to the American dollar.

The American President, Bill Clinton, has called on the Asian economies to make the economic reforms that the International Monetary Fund has called for.

New York leads recovery

It was in New York that the markets started to recover from Monday's 9% fall in the Hang Seng index, which followed the collapse of Peregrine Investments.

Wall Street initially plummeted by some 130 points in the first 15 minutes of trading, but the Dow index recovered to end up 66.76 at 7647.18.

Analysts said the bounce in US stocks was a relief rally after the Dow lost 386 points last week - its biggest weekly decline in point terms.

The London stock market also recovered after more than £26bn was wiped off the value of leading shares.

Fears of a meltdown sent the FTSE 100 tumbling by 150 points to 4988.3 in the morning.

But the rally in New York helped lift it to 5068.8 by the close - a fall of 69.5 points or around £12bn.
 

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