Tokyo rose nearly one per cent on the back of a stronger yen, and Australian shares climbed two per cent.

Japan's benchmark Nikkei average ended the morning up 103.65 points or 0.72 per cent at 14,473.28. Spurring the tonic effect was a stronger yen, which stood at 136.81/6.91 against the dollar shortly after 0230 GMT before slipping a bit but still off its lows.

Malaysian markets sprinted eleven per cent to lead a Southeast Asian rally, and shares in Jakarta, Manila, Seoul and Taiwan surged between one and two per cent each.

Australia's benchmark All-Ordinaries climbed 45.5 points or about 1.9 per cent to 2,503.7.

"It is all US driven this morning," said a Sydney-based dealer at an American investment bank.

"Frankly, I am a bit surprised that we are up this much. I thought yesterday's afternoon rally would have pre-empted much ofit."

Tokyo traders heaved a sigh of relief after New York posted its second-largest-ever point gain overnight, easing nerves frayed by a global equity rout.

"After several days of weakness, we've watched New York rise and the yen improve," said Yasuo Ueki, manager at Nikko Securities.

"This is a very auspicious change of environment."

Overnight, the Dow Jones Industrial Average closed up 288.36 points or 3.82 per cent at 7,827.43.

In Hong Kong, the Hang Seng index rose 5.75 per cent to 7,468.72 within minutes of opening, though it fell back to 4.78 per cent higher at around 0330 GMT.

"The market is reacting to the US market rebound, and those who sold short might be forced to buy in," said Sean Li, associate director at Amsteel Securities.

Traders said Hong Kong shares rose after the stock exchange announced the suspension of short-selling in the three largest-cap stocks.

Technical factors helped Malaysian shares shrug off tight new foreign exchange controls to bounce sharply, driven bysupport from local funds, dealers said.

The composite index was up 11.09 per cent to 291.84.

"This looks like a technical rebound," said a local dealer."There has been some buying by local funds; it's quite a rare opportunity for them to come in like this."

The new controls announced on Tuesday permit foreign investors to continue buying Malaysian shares, but require them to keep their the investments in the country for at least a year.

Jakarta stocks were up 3.59 per cent.

"Regional gains and the rise on Wall Street helped the Jakarta composite index today, but poor first-half corporate results are seen weighing down the index," said Asiolan Sitorus, an analyst with PT Nikko Securities.

South Korea's main index was up 1.67 per cent at 314.88points.

Taiwan shares were 2.54 per cent up at 6,495.79 points, driven by the US rebound and president Lee's recent appeal for market confidence, dealers said.

Philippine shares swung up as local players rummaged through bargain stocks, driving the30-stock composite index up 0.93 per cent up at 1,202.85 points.