Hong Kong (CNN) — Asian stock markets forged higher Monday following Spain’s move to seek a €100 billion euro ($125 billion) credit line to strengthen its troubled banking system.
The euro also gained ground against the dollar after the eurozone’s finance ministers said they would respond favorably to Spain’s request for aid.
Ben Kwong, chief operating officer of Hong Kong-based securities firm KGI Asia, said the agreement would help “ease the financial turmoil in Europe.”
“It’s particularly important because the Spanish banking system has been under pressure,” he told CNN. “This latest move will help lower funding costs for Spanish banks.”
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In late morning trade, Hong Kong’s widely watched Hang Seng Index was up 2% at 18,881.99 points, while Japan’s Nikkei index was up by a similar margin at 8,631.84 points. Shanghai stocks lagged gains, trading 0.3% higher at 2,288.7 points.
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The euro gained more than 1% against the dollar to change hands at $1.2637. The euro also rose against the British pound and the Japanese yen.
Spain asks EU for aid, not a bailout
Kwong said that Asian stock markets also got a lift from stronger-than-expected trade data from China.
China has long been seen as a bright spot in the world economy, but fears have been growing that its rapid economic expansion may slow sharply following a string of weak data.
Investors are likely to remain cautious before weekend elections in Greece, which is likely to provide another major turning point in the European debt crisis.
Spain’s request for assistance came after it became increasingly expensive for the government itself to raise money to help the country’s struggling financial institutions.
In late May, the country’s fourth largest bank, Bankia, which was created from a number of failing financial institutions, said it needed a further €19 billion euros in capital.
This sent Spain’s borrowing costs to around 7% — a level that is regarded as unsustainable and has led other EU states such as Ireland and Portugal to seek European and International Monetary Fund bailouts.
The IMF welcomed Sunday’s move by eurozone finance ministers to help Spain and said the scale of the proposed financing “gives assurance that the financing needs of Spain’s banking system will be fully met.”
Spanish Prime Minister Mariano Rajoy said that the agreement would help restore the credibility of the euro.
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