By Rafael Nam
HONG KONG, Feb 26 (Reuters) - Asian shares extended gains
on on Tuesday, with Japan and South Korea hitting multi-week
highs, on hopes that U.S. bond insurers will keep their top
credit ratings, but plenty of caution remained in a region that
has suffered heavy losses.
As willingness to invest in riskier assets like stocks
slowly returned, bonds in the region edged lower and the
low-yielding Japanese yen <JPY=> remainder under pressure.
Gold extended falls on news the U.S. Congress will support
sales of bullion by the International Monetary Fund (IMF),
while oil held steady above $99 a barrel.
Standard & Poor's on Monday removed its threat to downgrade
MBIA Inc <MBI.N> citing confidence the U.S. bond insurer could
raise more capital, while optimism remains for a rescue plan
for Ambac Financial <ABK.N>.
The fate of insurers has weighed on investors' minds in
recent weeks, given that downgrades could spark sell-offs of
the debt they have guaranteed, potentially leading to further
writedowns in the global financial sector and worsening a
global credit squeeze.
But analysts urged caution, noting the fate of bond
insurers still remains up in the air, while other risks such as
the potential of more credit-related writedowns at global
lenders and a slowdown in the U.S. economy remain in place.
"While Monday's news on U.S. bond insurers was positive, it
is still not enough to show a fundamental change in the U.S.
subprime mortgage crisis, said Samuel So, an analyst at Samsung
Securities.
"Unless we see a significant improvement in U.S. housing,
consumption or employment data, further market gains from the
current level look unlikely."
Others like Lucinda Chan, division director at Macquarie
Equities in Sydney, also said investors needed more certainty.
"We just need to see a nice chunky headline that says that
all these insurers are okay now, that they have been given
extended time or assistance by investments banks by providing
loans," she said.
"Unless we see that, the market will remain wary."
The MSCI measure of Asian stocks excluding Japan rose
<.MIAPJ0000PUS> rose 0.9 percent by 0200 GMT after having
dropped almost 10 percent this year as of Monday's close.
Shares in South Korea <> rose to their highest levels
in five-weeks in early trade, though the main index trimmed
gains to be stand 0.4 percent higher by mid-morning, while Hong
Kong opened up 1.3 percent.
A similar story played out in Japan, where the Nikkei
<> hit a six-week high, but then eased toward a 0.5
percent gain. Exporters such as Canon Inc <7751.T> were among
the gainers as a weaker yen is seen boosting its returns from
overseas markets.
Taiwan shares <> rose 0.8 percent on continued hopes
for improved ties with China, while Chinese stocks <>
gained 1.2 percent, recovering from a slump a day earlier,
after the securities regulator warned companies against making
big issues of new shares.
JAPANESE BONDS FALL
Japanese government bond futures initially fell to a
two-month low but trimed their losses as the morning session
progressed. March 10-year futures <2JGBv1> fell as low as
136.89, but was later down 0.12 point at 137.03.
The Japanese yen <JPY=> remained under pressure against
major currencies, trading at 108.02 against the dollar, after
falling on Monday amid improved risk appetite from investors.
Gold extended falls on Tuesday, with spot prices <XAU> down
at $933.90/$934.70 amid fears that gold sales by the IMF will
take a toll on sentiment and weigh heavily on bullion. It
dropped nearly $6 an ounce overnight.
The sale of the gold requires U.S. congressional approval
and an 85 percent majority vote of the IMF's board of member
countries.
Oil <CLc1> held steady at $99.22 a barrel after rising
overnight as cold weather in Europe and parts of the United
States sparked demand for heating fuels.
