Asian stock markets surged Wednesday as investor sentiment was buoyed after the U.S. House of Representatives passed a deal to avert the fiscal cliff.
Hong Kong's Hang Seng climbed 2.20 percent or 498.42 points to 23,155.34, and India’s BSE Sensex advanced 0.85 percent or 166.02 points to 19,746, while South Korea’s KOSPI Composite surged 1.68 percent or 33.60 points to 2,030.65. Markets in Japan and China remain closed for a public holiday.
The U.S. House of Representatives voted in favor of the Senate-approved tax bill late Tuesday that will see a hike in income tax rates on only the wealthiest adults. The Republican-dominated House approved the bill by 257 to 167. A failure to arrive at a deal would have triggered $600 billion in spending cuts and tax hikes that threatened to push the world’s largest economy into a recession.
The deal will allow tax hikes for individuals earning more than $400,000 and couples making more than $450,000, who will see tax rates rise to 39.5 percent from the current 35 percent rate. Unemployment insurance is extended for two years while sharp spending cuts amounting to about one-third of the cliff have been postponed for two months.
"If the fog caused by the fiscal cliff disappears, there will probably be moves toward putting risk back on," Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, told Reuters.
Sentiment was also buoyed after the official data released Tuesday showed that manufacturing activity in China expanded for the third straight month in a row in December. The data released by the China Federation of Logistics & Purchasing showed that the Purchasing Managers' Index (PMI) remained unchanged at 50.6 in December compared with the previous month.
Hong Kong stocks rallied to a 19-month high, led by gains from financial companies and property developers. China Life Insurance Co Ltd. climbed 5.73 percent and China Resources Land Ltd. surged 4.98 percent while CNOOC Ltd. gained 2.26 percent.
Seoul shares surged Wednesday as a last-minute deal averted the U.S. fiscal cliff crisis. South Korea’s manufacturing activity expanded in December to end six months of contraction. The HSBC Purchasing Managers’ Index rose to 50.1 in December from 48.2 in November.
Among the stocks, Samsung Electronics Co. Ltd. surged 3.55 percent and LG Display Co. Ltd. advanced 1.45 percent, while Hyundai Motor Co. fell 1.14 percent.