The Tokyo market was shut for a holiday, but elsewhere in the region, Hong Kong gained 2.7 per cent, Singapore rose 2.2 per cent, Sydney advanced 1.6 per cent and Kuala Lumpur surged 3.4 per cent. Bangkok climbed 5 per cent and even Jakarta rose 5.4 per cent, shrugging off anti-Christian riots the previous day that left at least 13 people dead, while Manila ended 4.4 per cent higher. Dealers said Wall Street's 1.1-per cent gain on Friday, which saw the Dow Jones Industrial Average close 103.50 points at 9,159.55 had sent a reassuring signal to regional markets.

Investor sentiment was also buoyed by an easinginterest-rate environment, and dealers reported keen institutional interest in bank stocks. In Hong Kong share prices surged 2.7 per cent on Monday to hit a seven-month high as lower interest rates kicked in and investors hoped for a further easing of credit by local banks, dealers said. "Basically, the strong buying is due to expectations of further interest rate cut before the year ends," said Michael Ng, deputy managing director of Sassoon Securities.

The key Hang Seng index gained 281.17 points to close at 10,514.53 - its highest level since April 19 when the index was at 10,383.68. The value of turnover amounted to 8.55 billion Hong Kong dollars ($ 1.1 billion), against Friday's 8.451 billion dollars. The market opened strongly with the key barometer gaining 252.39 points by the end of the morning session after Hong Kong banks cut prime lending rates by a quarter point to 9.5 per cent begining Monday. The rate-cut was announced after the market closed on Friday when it slipped 79.94 points to10,233.36. It was the third cut in interest rates this year and the second since October 16.

Dealers said sentiment remained bullish - even though the widely-anticipated rate cut had been priced in - as another domestic rate cut was anticipated by the end of the year.

"There has been an improvement in the outlook in light of interest rate cuts," HSBC Securities sales manager Jerry Pang told AFX-Asia, an AFP-affiliated financial news wire.

Sean Li, associate director of Amsteel Securities, said investors were increasingly confident about European banking sector stocks and that the confidence was spilling over into the stocks of their Asian counterparts.

"The buying of (European) bank stocks is spilling over to banks in Asia," including British giant HSBC Holdings Plc, Li said. Tai Fook Securities director Lennon Chan said overseas institutions were buying HSBC stocks in an attempt to push up the futures so that they could sell other stocks to take profit later.

Chan said that despite the bullishsentiment, the index was likely to meet strong resistance at the 10,500-point level as another rate cut was not expected in the next two weeks.

Singapore: Singapore's key stock index closed 2.2 per cent higher on continued buying by funds buoyed by falling interest rates and expected wage cuts to reduce business costs, dealers said. The Straits Times Index ended 29.04 points higher at 1,376.94 while the broader All-Singapore index ended 7.82 points up at 378.54.

Profit-taking wiped the gloss off many blue chips which rose in early trade, dealers said. Buying was helped by the lower interest rate environment, which pumped liquidity into the market.

"Businesses and investors benefit from lower borrowing cost and interest to service loans. The market benefits because (of) investors who find that the market is a more profitable alternative to holding cash," the dealing director of a local broking firm said.

Kuala Lumpur: Malaysian share prices closed 3.4 per cent higher buoyed by local buyingsupport and speculative interest on cheaper stocks, dealers said. The benchmark Kuala Lumpur Stock Exchange's composite index finished at 477.17 points, up 15.61 points from Friday's close. An institutional dealer at a local brokerage said local funds were seen buying bluechip stocks, with retail interest in cheaper counters.

"There seems to be some optimism in the market and if this goes on, I think we can breach 500 points. Part of it may be window-dressing though," he said. "Retail players always move in when the bigger players are around hoping not to miss out on anything," he said, adding banks were looking more favourably on margin accounts with more liquidity in the system.

Bangkok: Thai share prices climbed 5 per cent, boosted by buoyant sentiment overseas and optimism that Thailand was on the threshold of economic recovery, dealers said. The composite Stock Exchange of Thailand (SET) index closed up 18.50 points, or 5 per cent at 390.43, while the select SET-50 index ended up 1.56 pointsat 29.00 . Gains were led by the financial and property sectors boosted by renewed confidence in overseas markets and continued buying by foreign investors. An analyst with Adkinson Securities said the market might extend gains in despite profit-taking as most investors were more confident the economy would recover next year.

He said foreign investors had been buying major banks and blue chips, prompting local retailers to follow suit. "Property was also a focus as investors expect this sector to benefit from declining lending rates," the analyst said.

Jakarta: Indonesian shares closed 5.3 per cent higher despite anti-Christian riots in the capital the previous day which left 13 people dead, dealers said. "This is a liquidity-driven market. Foreign funds continue to flow into the market while local investors also continue to switch their money into stocks on the back of lower interest rates," a dealer with a local brokerage said.

The Jakarta Stock Exchange composite index climbed 21.335 points at424.987. Turnover totalled 883.9 million shares worth 553.638 billion rupiah ($ 73.1 million). The dealer said continuing gains seen in the market were supported by several factors, including regional strength, expectations of further interest rate cuts and the switching of funds into equities from the money market. He said some investors also believed that the economic recovery programme has started to show positive results and that incidents of violence were only temporary and transitional. "Some people even believe that the ultimate goal of political reform will be achieved but that it takes time and victims to get there," he said.