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India and Hong Kong Lead Asian Rally

Japan ends flat as most markets in the region move sharply higher.

Led by big gains in India and Hong Kong, Asian markets snapped sharply into the green on Tuesday.

In India, the BSE Sensex soared 878 points, or 5%, to 18,493 points, after regulators eased plans for a ban on overseas brokers trading in participatory notes by registering more foreign investors than expected onshore.

The "p-notes" enable foreign investors to buy shares on the Indian markets anonymously, and the proposed ban accounted for last week's 9% plunge in the Sensex.

"For just now, the fear is out of the market and the people who were sitting on the sidelines have started applying money back into the market," says Jayesh Shroff, a fund manager at $6-billion SBI Mutual Fund in Mumbai.

Shroff adds that those who were initially using the p-notes to buy shares have been a large segment of the buying.

Shares rallied across the board, as

Tata Motors

(TTM) - Get Report

gained 3%, to 796 rupees,

Icici Bank

(IBN) - Get Report

rose 3.6%, to 1,100 rupees, and


(HDB) - Get Report

surged 7.4%, to 1,474 rupees.

Only technology stocks lost mildly, with


(WIT) - Get Report

down 0.49%, to 492 rupees, and


(INFY) - Get Report

off 0.17%, to 1,883 rupees, on profit taking.

"Essentially everything boils down to growth," says Sonal Varma, an economist at Lehman in Mumbai. "India is a strong growth story and we expect it to bounce back to 9% growth next year, from 8.9% this year." Varma added she does not expect any more policy rate hikes any time soon.

Hong Kong's Hang Seng climbed 1003 points, or 3.54%, to 29,376.86, clawing back nearly all of Monday's losses, while in China the Shanghai Composite Index rose 106 points, or 1.87%, to 5,773.39 points.

Both markets rose on the back of bullish earnings sentiment and bargain hunting, after U.S. technology stocks rebounded in Monday's trading and

China Mobile

(CHL) - Get Report

said its net earnings grew by 38%.

In Hong Kong, shares in China Mobile surged 5.34%, to HK$149.80, and


(PTR) - Get Report

TheStreet Recommends

, which now expects to raise more than $9 billion in a Shanghai listing on Oct. 26, rose for the second day this week, by 3.41%, to HK$19.40.

Also in Hong Kong, shares in

China Life Insurance

(LFC) - Get Report

jumped 3%, to HK$51.30.

Aluminum Corp of China

(ACH) - Get Report

, which has been one of the hardest hit by the recent downturn, rose 2.13%, to HK$23.95.

In Shanghai, China Life Insurance gained 2.88%, to 68.97 yuan, while Aluminum Corp of China bounced 4.7%, to 49.66 yuan.

The unexpected gains may be good news for the

iShares/FTSE Xinhua 25 Index

(FXI) - Get Report

and the

iShares Hong Kong

(EWH) - Get Report

, if those gains can be repeated on tomorrow's open. Right now, many Asian investors are looking to the U.S. indices to guide the way in their own markets.

In Korea, the Kospi jumped 21 points, or 1.07%, to 2,005 points, led by


(PKX) - Get Report

, which jumped 3.08% to 602,000 won, after an analyst upgrade to hold from buy. That's the steelmakers biggest one-day rise since the beginning of the month.

Not every money manager is happy with the gains, however, with some saying value is increasingly hard to find in the recovering Asian markets.

"India still remains one of the more expensive markets across Asia, excluding China of course," says Kwok Chern-Yeh, an investment manager at Aberdeen Asset Management in Singapore. "It's not a cheap market. The challenge is to balance value and growth."

He recommends Singaporean stocks, in particularly banks, which he says are trading close to two times book value, adjusted for property and stock holdings. Kwok also likes Singaporean telecoms, because of their diverse earnings streams.

Investors can take advantage of Singaporean shares through the

iShares Singapore Free Index

(EWS) - Get Report


In Japan, the Nikkei 225 ended the day flat, up 12 points, or 0.07%, to 16,450 points after rallying throughout the day. The Topix rose 7.48 points, or 0.5%, to 1570.55. The yen was weaker, trading at 114.38 vs. dollar, from 114.2 vs. dollar earlier in the day.

Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at

. He lives in New York.