Tokyo - Asian stocks, led by financial issues, made major gains in early trading Monday, reacting to a US decision to take control of the two largest US mortgage lenders and guarantors, Fannie Mae and Freddie Mac.

In Japan, the benchmark Nikkei 225 Stock Average jumped 438.04 points, or 3.59 per cent, in morning trading to 12,650,27 on investor confidence that the US government move would calm turmoil in global financial markets.

The broader Topix index of all first-section issues also rose 46.49 points, or 3.97 per cent, to 1,217.33.

The increases were seen a day after the announcement that the Federal Housing Financing Agency would take over Fannie Mae and Freddie Mac as the US government sought to deflect the rising threat of mortgage defaults to the two companies, which manage nearly half the 12-trillion-dollar US mortgage market

The two firms are to be placed under a so-called conservatorship, their chief executives replaced and their dividends eliminated while the US Treasury is to purchase up to 100 billion dollars of senior-preferred stock in each company.

Hong Kong shares rocketed by nearly 4 per cent in early trading. Shortly after midday, the Hang Seng Index stood at 20,701.13, up 767.85 points, or 3.85 per cent.

The surge in prices followed a black week on the Hong Kong stock market, which saw shares tumble below 20,000 for the first time in 17 months.

Analysts said the rally was generated almost entirely by the Fannie Mae-Freddie Mac announcement.

Taiwan's stocks also were sharply higher in early trading, rising more than 5 per cent on the news from Washington as well as a string of measures planned by the local financial regulator to support the market.

The Weighted Price Index of the Taiwan Stock Exchange, which opened 4 per cent higher, continued its upward trend, rising 340 points, or 5.4 per cent, to 6,647 by mid-morning.

Most major financial shares were up by their 7-per-cent daily limit as the measures to be approved and announced by Taiwan's cabinet on Thursday included relaxation of the criteria for the buyback of treasury shares by financial holding firms.

Australian shares leapt 3.7 per cent at the opening bell.

The ASX200 index rose 185 points, or 3.7 per cent, to 5,062 as stocks rose across the board. (dpa)