Asian stocks rallied yesterday after reports showed the United States economy was growing rapidly with little inflation, boosting hopes regional exporters would see increased demand for goods. Hong Kong saw the region's biggest percentage gains, with the Hang Seng Index rising 3.9 per cent to 13,256.95 points on a turnover of $9.82 billion. The Philippine Composite Index was next with a gain of 3.4 per cent to 2,036.05 points. Japan's Nikkei-225 Index saw the biggest gains in market capitalisation as it put on 3.03 per cent to 17,942.08 points, its biggest rise in almost six months. 'It's a very good environment for equities,' Pacific World Asset Management's investment director in Hong Kong, Chris Choy, said. 'I think in the coming months, there's no excuse to adjust interest rates.' In a speech on Thursday, US Federal Reserve chairman Alan Greenspan said the economy was likely to stay on a sustainable, non-inflationary path. Meanwhile, data showed employment costs were increasing only gradually even as economic growth continued to barrel along. Analysts believed Mr Greenspan's speech did not indicate he was ruling out a further interest rate increase at the Fed's next policy meeting on November 16, but market reaction showed investors believed the US economy could absorb another rate rise. The Dow Jones Industrial Average on Thursday ended 2.19 per cent stronger at 10,622.53 points after investors welcomed the employment cost index, which showed a smaller than expected 0.8 per cent rise in the third quarter after a 1.1 per cent second-quarter gain. Gross domestic product data showed the economy expanded 4.8 per cent in the July-September quarter. In Japan, the GDP figures gave rise to hopes that the US economy was in a position to absorb more exports, particularly of consumer electronics. Sony Corp (Stock Split, Page 16), which depends on the US market for one-third of revenue, was the biggest gainer, rising 3.5 per cent to 16,260 yen (about HK$1,202). Other big gainers included Toyota Motor Corp and Canon. 'Rising inflation and interest rates would exert downward pressure on consumer spending, though it hasn't to date, and doesn't look like it's going to,' American Express Asset Management's strategist in Tokyo, Keith Edwards, said. A Japanese brokerage trader said: 'The Dow rose more than 200 points [on Thursday]. Also, there were several trust funds set up [yesterday] and the market rose on that.' In Hong Kong and elsewhere in the region, property and banking saw sharp gains on expectations of less pressure on interest rates. 'It was very strong on Wall Street and there was the US bond market rally,' South China Brokerage vice-chairman Howard Gorges said, while warning 'we're not out of the woods yet on interest rates'. In Singapore, the Straits Time Index put on 2.19 per cent to 2,047.15 points, thanks also to a shot in the arm from the rises in Hong Kong and Japanese stocks. The Jakarta Composite Index closed 2.75 per cent higher at 593.869 points. Dealers said the market was driven up mainly by a limited buying in some selective blue chips including Astra International and Telkom. Pentasena Arthasentosa dealer Gurasa said: 'Foreign investors, who had been selling stocks recently, now have selectively bought some blue chips.' South Korea's Composite Index rose 1.53 per cent to 833.51 points and Australia's All Ordinaries Index gained 1.04 per cent to 2,885.1 points. Malaysia stood out as a laggard, with the Composite Index dropping 0.97 per cent to 742.87 points despite the unveiling of a 'people-friendly' budget that included a personal income tax cut. A dealer said: 'It is very difficult to say why but that is what apparently happened. It is very surprising.'