Ironically, some of those fuelling the surge in stock prices were the larger hedge funds, accused of causing the previous declines.
As prices rose hedge funds found that the short positions they had taken in Asian markets were uncovered, forcing them to buy shares to cover gambles taken when prices were falling.
The Hong Kong market rose 9 per cent, its second biggest percentage gain this year. The battered Indonesian market did even better, almost managing a 11 per cent rise.
Singapore was also up 9 per cent while other regional markets, such as the Thai and Philippine exchanges, registered gains of 7 to 8 per cent.
Asian currencies also managed to gain strength, consolidating a trend that has taken notably weak currencies, such as the Thai baht and Indonesian rupiah, to new highs for the year.
The interest rate cut by the US Federal Reserve was seen as signalling a relaxation of the credit squeeze, which is helping to depress Asian economic activity.
"I think it's a turning point, in that markets would have more bottom", said Howard Georges, vice-chairman of the Hong Kong-based South China Brokerage. However, he warned against excessive optimism.
Andrew Fung, the treasurer of Commonwealth Bank of Australia in Hong Kong, was even more cautious.
"There's no change of course in the slowing down of the economies," he said. "Personally I think the stockmarket has well overshot."
Nevertheless, in Hong Kong yesterday the Hong Kong Association of Banks followed the US interest rate cut by announcing that it too would lower the lending rate by 0.25 per cent.
As the Hong Kong dollar is linked at a fixed rate to the US dollar, interest rate movements usually move in tandem but Hong Kong interest rates are now well above those in the United States.
To top off a day of unaccustomed good news the upper house of the Japanese parliament ended months of political wrangling yesterday by passing a bill that will allow some $500bn of government funds to be used to support banks that are sound but facing liquidity problems.
This should ease Japan's liquidity crisis and strengthen the banking system because access to the funds is conditional on consolidation of banks and enforces a greater level of transparency.