* Asia ex-Japan equity valuation lowest since March 2003
* Treasuries rise, US stock futures down as questions
linger
* Signs of stabilisation in overnight lending among banks
(Repeats to include graphics link)
(Updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, Sept 22 (Reuters) - Asian stocks climbed on
Monday, after more details about the U.S. government's $700
billion crisis solution encouraged bargain hunting, but
questions lingered about long-term implications and the
economic outlook.
The U.S. dollar fell against the yen and Swiss franc, and
U.S. Treasury debt prices edged up, with market participants
playing it safe before the plan is ironed out in Congress.
Stock futures were indicating major European markets would
open largely steady on Monday. The FTSEurofirst 300 index
<> surged 8.2 percent on Friday, its largest single-day
gain ever.
Willingness among investors to take more risk for higher
returns slowly returned, after news of what is likely the
biggest bailout in U.S. history surfaced on Friday, capping an
historic week in which Lehman Brothers <LEHMQ.PK> filed for
bankruptcy, Washington rescued insurer American International
Group <AIG.N> and Bank of America <BAC.N> bought Merrill Lynch
<MER.N>.
Many aspects of the plan have yet to be worked out and
tensions have already arisen over Congressional efforts to curb
the executive pay of programme participants. However, analysts
and investors were looking beyond the days of massive
writedowns and focusing more on where growth will come from.
"The $700 billion plan should stem the bleeding. However,
the patient is still fragile," said Thomas Lam, senior Treasury
economist with United Overseas Bank in Singapore. "Essentially,
the focus, I think, should shift to some extent from the state
of illiquid securities to fundamentals of the U.S. economy and
availability of capital."
For a graphic on fear gauges, click
https://customers.reuters.com/d/graphics/US_FINFR0908.gif
Japan's Nikkei share average <> closed up 1.4 percent,
after hitting a three-year low last week. The index has
rebounded around 7 percent in two days.
Outside of Japan, stocks in the Asia-Pacific region were up
2.4 percent, bouncing further from a two-year low plumbed on
Thursday, according to an MSCI index <.MIAPJ0000PUS>.
In the four weeks to Sept 18, amid sheer panic around the
world with regard to the stability of the financial system, the
index was trading at 10.1 times forecast earnings for 2009 --
the cheapest valuation for an upcoming year since March 2003,
according to Thomson One.
China's main stock index, the Shanghai composite <>,
rose 7 percent as investors dove back in the worst performing
market in the world so far this year.
The Chinese government said on Thursday it would buy shares
in the market, including beaten-up stocks of the country's top
banks, in its strongest effort to improve investor confidence
and turn the equity market around.
PICKING UP THE PIECES
Investors around the world were still grappling with the
repercussions of last week's financial earthquake that leveled
Wall Street.
Goldman Sachs <GS.N> and Morgan Stanley <MS.N> got approval
to become bank holding companies regulated by the Federal
Reserve on Monday []. That marked an unceremonious
end to the investment banking model, which involved buying,
repackaging and then selling complex credit products that
created a massive tiger trap once the underlying debt went into
default.
Some analysts also became concerned about the long-term
impact of having the U.S. government open up its balance sheet
to illiquid securities whose price is difficult to find.
The bailout plan itself would burden U.S. taxpayers even
more after the effective nationalisation of Fannie Mae and
Freddie Mac earlier this month and would weigh on the U.S.
fiscal position, putting the world's largest debtor even more
in the hole.
U.S. stocks looked set to open weaker on Monday, with S&P
500 index futures <SPc1> down 0.6 percent. That was on the
heels of Friday's massive rally in stocks worldwide -- the
largest ever one-day advance as measured by market value. The
MSCI all-country world equity index <.MIWD00000PUS> added more
than $1.5 trillion in value on the day.
The U.S. dollar fell against the yen and the euro, as
dealers awaited further details of the bailout plan.
The dollar fell nearly a full yen to 106.55 yen <JPY=>,
while the euro rose 0.1 percent to $1.4480 <EUR=> after earlier
touching a three-week high around $1.4560.
"The market has come out of a near panic stage after the
U.S. government plan," said Tohru Sasaki, chief forex
strategist at JPMorgan Chase Bank in Tokyo. "But we're still
far from being able to say the problems are solved as we don't
know yet how effective the newly created U.S. facility will be.
The market looks set to remain unstable for a while," he said.
The 10-year U.S. Treasury note yield <US10YT=RR>, which
moves in the opposite direction of the price, slipped to 3.77
percent after jumping nearly 30 basis points on Friday to 3.81
percent.
The short-end of the market reflected slightly reduced
demand for very short-term liquidity, with yields on 3-month
and 6-month bills above 1 percent after dropping to near zero
last week as investors bailed wholesale out of money market
funds.
Also, overnight U.S. dollar borrowing rates were around 3
percent on Monday, only slightly above the federal funds rate.
During the most dire days of the crisis, the rate rose to 6
percent in the Asian session and had hit 10 percent at one
point during the European session.
The October U.S. light crude contract <CLc1> was up
slightly at $104.90 a barrel, while gold in the spot market
<XAU=> dipped to around $868 an ounce.
(Additional reporting by Satomi Noguchi in TOKYO; Editing by
Lincoln Feast)
