HONG KONG (Reuters) - Most Asian stock markets edged higher on Wednesday, rebounding from a two-year low as Chinese shares surged on hopes for policies from Beijing to jumpstart growth, though many analysts said it was a long shot.
The dollar struggled as crude oil crept above $115 a barrel and gold prices edged higher, taking some of the steam out of the U.S. currency's recent surge to a seven-month high.
World stock markets slid to the lowest since September 2006 on Tuesday, with investors increasingly skeptical about earnings expectations for 2009 given the mixed results so far in 2008 and constant reminders about instability in the financial sector.
However, most Asian indexes turned higher as cheap valuations proved irresistible, especially with markets rife with chatter about fiscal stimulus in China.
"Bargain hunters have returned to the market on talks that a rescue package is on the way," said Francis Lun, general manager from Fulbright Securities in Hong Kong. "We are all waiting for a miracle," Lun added.
Hong Kong's Hang Seng index (HKSE:^HSI - News) rose 1.9 percent, after closing at a one-year low on Tuesday, with shares of China Mobile (HKSE:0941.HK - News) providing the biggest boost.
Shares of Asia's largest wireless carrier, up 2 percent, hit a one-year low before the rally swept through the region.
The Shanghai composite index (^SSEC - News) surged 6 percent after touching a 20-month low. The index is watched by many global investors as a gauge of risk taking and a leading indicator for the world's fastest growing economy.
The MSCI pan-Asia equities index (^MIAS00000PUS - News) edged up 0.3 percent after earlier plumbing the lowest since July 2006.
The MSCI all-countries world index (^MIWD00000PUS - News) on Tuesday tumbled to a 23-month low, down 18 percent year-to-date.
Japan's Nikkei share average (Osaka:^N225 - News) rose 0.2 percent, tagging along for the rally, with retail companies like clothing chain operator Fast Retailing Co Ltd (Tokyo:9983.T - News) paving the way higher.
TOO EARLY FOR FISCAL STIMULUS IN CHINA?
Despite the sudden turnaround in Asian stocks, apprehension about the earnings outlook was rife, especially after the Bank of Japan on Tuesday described the world's second-largest economy as "sluggish" -- a term it has not used since the Asian financial crisis a decade ago.
Donald Straszheim, vice chairman of Roth Capital Partners in Los Angeles and a long-time China analyst, said the Chinese stock market, the worst performer this year, will continue to fall because of the toxic concoction of slowing growth and high inflation.
He expects earnings to rise 15 percent in China this year, down quite sharply from 30 percent to 45 percent pace enjoyed by most sectors in 2006 and 2007.
"Shanghai has proven to be a very emotional market, and is likely to stay that way," said Straszheim in a note to clients.
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