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Many investors had expected the worst on Monday, following last week’s turmoil but Asian stocks were calmer, responding to central banks use of liquidity to soothe fears of a credit crunch following losses on subprime loans in the US.

North-east Asia and Australian share markets even bounced back a little after some of the biggest drops last week in five months. Currencies were more subdued. The yen strengthened against the US dollar, the New Zealand dollar and the euro as investors adjusted positions in the opaque carry trade of borrowing yen for investment in higher-yielding assets.

Shanghai led the rise in equities, with the Shanghai Composite closing 1.49 per cent higher at 4,820.06. Investors ignored strong inflation figures. Hong Kong property stocks and the Industrial & Commercial Bank of China led the Hang Seng Index 0.45 per cent higher to close at 21,891.10.

In Australia, the S&P/ASX 200 closed 1.27 per cent higher, after falling 3.7 per cent on Friday. The Reserve Bank of Australia upgraded its outlook for the country’s economy. BHP Billiton, the world’s largest miner, said it would join the world’s largest oil company, Exxon Mobil, to explore for natural gas. Billiton shares closed 1.4 per cent higher at A$35.14.

Exporters led Seoul shares higher. The Kospi closed at 1,849.26. Tokyo regained relative calm, following a second injection of funds by the Bank of Japan, and the Nikkei index closed up 0.21 per cent at 16,800.05.

The broader Topix index slid down, however, to its lowest level since last December, losing 0.28 per cent to close at 1,632.64 as bank shares were shunned.

The Bank of Japan followed on its Y1,000bn fund injection on Friday by pumping Y600bn into the banking system as the overnight call rate edged up above its target rate of 0.5 per cent.

The dollar lost 0.1 percent from late US trading Friday to hit 118.26 yen, and the euro slipped 0.3 percent to 161.61 yen, but stayed above a four-month low of 159.98 yen hit on Friday.

Despite Japan’s summer obon holidays, trading was active with 2.5bn shares changing hands on the Tokyo Stock Exchange’s first section, a high figure for the summer season.

Interest focused on issues that had faced strong selling recently.

Commodities-related shares gained, with Itochu, the trading company, rising 2.6 per cent, or Y31 to Y1,238. Cosmo Oil, which lost 17 per cent last week, gained 4.2 per cent to Y547.

Mitsubishi Materials, a leading metals smelter, surged 9.8 per cent to Y639 and Sumitomo Metal Mining added 4.4 per cent to Y2,380.

Shipping company shares firmed. Kawasaki Kisen, increased 3.9 per cent to Y1,485 and Mitsui OSK Lines added 1.5 per cent to Y1,623.

Among individual stocks, NEC Electronics surged 4.53 per cent to Y3,460 after a report that it would aim to double sales in China.

Kyocera, an electronics parts maker, rose 2.9 per cent to Y10,720, after losing 7.6 per cent last week.

Financial issues, however, continued to suffer selling amid lingering concerns about the subprime mortgage market and credit market problems.

Consumer finance companies also continued to be hit. Credit Saison, a credit card company, fell 5.3 per cent to Y2,840 after it unveiled a 41 per cent rise in bad loan expenses last week.

Copyright The Financial Times Limited 2017. All rights reserved.

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