Citigroup report, economists' forecast send stocks higher

New York, February 23: Riding high on the news that the U.S. government will enhance its stake in the besieged banking behemoth Citigroup to tide over the financial crisis, the Asian markets remained bullish Monday, with Hong Kong and South Korea's benchmarks up more than 3 percent.

The icing on the cake is that a survey by some economists has projected the end of the recession by the year end.

With good news pouring in, the Wall Street could also kick off the week with a positive opening rally. Apprehensions that big players like Citigroup and Bank of America might become state-owned due to increasing bad debts had sent the markets in a tizzy last week.

Rudolf Buxtorf, a fund manager at RBS said of the talks between Citi and the government, “The news is positive in the sense that we won’t see a bankruptcy or an even worse catastrophe. The government measures will prevent the world from going under.”

As part of the agreement with Citigroup, the government would switch a hefty piece of its preferred Citigroup shares to common shares. These shares were acquired by the government as a part of the bank bailout plan.

Francis Lun, general manager of Fulbright Securities Ltd., opined, "People are taking it as a positive sign. It shows the government will not allow a major bank to fail again. They've learned their lesson with Lehman Brothers that the ramifications are so great, sometimes no amount of money can rebuild confidence."

Citi shares rose nearly 28 percent in European trading. U.S. futures were also higher on the Citigroup report. Hang Seng rose 3.8 percent and Kospi, too, was up 3.2 percent to close at 1099.55.

Meanwhile, a survey of 47 leading economists by The National Association of Business Economists has revealed that stronger-than-average GDP growth can be expected in 2010 as a turnaround begins later this year.