And Malaysian share prices leapt 8.9 per cent by mid-session on strong local institutional support following a massive selloff the previous day sparked by drastic foreign exchange controls clamped by the central bank.

The Dow Jones surged 288.36 points, or 3.82 per cent, to 7,827.43 on Tuesday, regaining some of the ground lost a day earlier which hammered Asian markets already depressed by the spectre of a regional recession. Hong Kong saw heavy short-covering following the gain in New York, pushing the Hang Seng index 317.63 points higher to close the morning session at 7,380.10.

"There is strong short-covering amid lower interbank rates andstrong gains on Wall Street," said Alex Tang, research head at Core-Pacific Yamaichi Securities.

He said institutions that had short-sold blue chips in recent sessions were seen buying heavily into large capitalised issues to square out positions.In Kuala Lumpur, Malaysia's key stock index recouped more than half the 13.3 per cent it lost the previous day after the central bank moved to drive speculators out of the financial markets. The Kuala Lumpur Stock Exchange index closed the morning session up 23.50 points at 286.20.

Dealers said foreign funds eased up on their initial selling to assess the impact of the wide-ranging controls aimed at insulating the economy from foreign speculators.

Bank Negara Malaysia, the central bank, pegged the local ringgit on Wednesday at a fixed exchange rate of 3.80 to the dollar. Ringgit held outside of Malaysia will not be legal tender starting October and foreign funds flowing into the local stockmarket cannot be repatriated for 12 months under the measures unveiledon Tuesday.

Australian share prices bounced back, gaining 2.3 per cent on Wall Street's back. The Australian Stock Exchange's benchmark All Ordinaries index rose 57.8 points to 2,516.0.Elsewhere in Asia, Japanese share prices closed barely higher as late selling eroded early gains on New York's rebound. The key Nikkei stock average of the Tokyo Stock Exchange rose 6.99 points to end at 14,376.62, after having gained 0.7 per cent at half-time.

"As some investors were expecting that the Nikkei 225 index may fall again to the 13,000-point level today if the New York market continued falling, the rebound overnight was good news," a Chuo Securities broker said. "But, New York still has some uncertain features, so it could fall sharply again."Taiwan stocks rose 2.2 per cent on buying support extended by government-linked funds and bargain-hunting. The Taiwan Stock Exchange weighted price index rose 136.5 9 points to 6,471.68.

Philippine share prices closed 0.5 per cent higher as Wall Street's rebound inspiredinvestors to pick up oversold issues. The Philippine Stock Exchange index gained 6.01 points to 1,197.77. "I think the euphoria is really due to the Dow's rebound," Jose Ricardo Garcia of Diversified Securities Inc said in Manila.

Indonesian shares rose 1.9 per cent, with the Jakarta Stock Exchange composite index gaining 6.349 points at 332.203 by mid-session. South Korean share prices closed 1.5 per cent higher, with Korea Stock Exchange main index gaining 4.69 points at 314.40. New Zealand stocks ended up 2.4 per cent with the NZSE-40 index rising 42.46 points to 1802.54.

HK government intervention pressured currency peg: Economist

The Hong Kong government's two-week buying spree in the territory's financial markets has increased pressure for the local currency's dollar peg to be abandoned, an economist said on Wednesday. Indosuez WI Carr chief economist Michael Taylor predicted the government will be forced to devalue the currency in three to nine months.

Taylor said in a report that theintervention - in which the government is estimated to have spent 15 billion US dollars on buying stocks - had damaged the government's reputation, making it harder to attract foreign capital.

The loss of that money will put further upward pressure on interest rates and force stock and property prices still lower, he argued in the report presented at a press conference.