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Asian stocks tumble on global banking woes
Jan 19,2009 00:00
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sian shares slumped on Tuesday on concerns that increasing woes in the global financial sector will deepen the world's economic downturn, highlighting the difficulties confronting incoming US President Barack Obama. The tumble came after Royal Bank of Scotland on Monday unveiled the biggest loss in UK corporate history, and after Britain launched a second bank rescue plan that failed to restore confidence in the wobbly financial sector. Sterling fell to its lowest in almost seven years and the euro dropped to a six-week low, while US stock futures slumped, signalling a potentially tough day ahead for Wall Street. The spreading caution benefited assets seen as safer, such as the Japanese yen and regional bonds. "The market is refocusing on the bigger global picture," said Justin Gallagher, head of Sydney sales trading at ABN AMRO, pointing as well to expectations for weak corporate earnings results in coming weeks. "Clearly the market today continues to factor in more disappointment and certainly, despite the inauguration of Obama ... the market is looking past that now and realising just how big a mess the global economy is in," he said. The MSCI index for Asia-Pacific stocks outside Japan slid 3 per cent as of 0240 GMT, close to the 2009 low. The index is now down nearly 9 per cent so far this year, after it fell in 2008 by 53 per cent - its biggest decline on record. The revival in risk aversion is reining in a rally in Asian shares that had seen the MSCI index surge as of Jan. 7 by 37 per cent from five-year lows hit in late November. Asian banking shares from HSBC to Japanese top lender Mitsubishi UFJ Financial Group were among the leading decliners in the region as worries intensify about a sector facing more credit and loan-related writedowns. Japan's Nikkei dropped 3.1 per cent. Indexes in Hong Kong and Australia fell more than 3 per cent, while markets in South Korea, Taiwan and Singapore fell more than 2 per cent each. US stock futures slid, with March S&P 500 futures down 13.1 points, or 1.5 per cent. Dow Jones futures fell 1.3 per cent. Governments worldwide are grappling with how to get their banks lending again to revive economies, despite already injecting billions of dollars and implementing other measures such as backing some of their debt. Royal Bank of Scotland said on Monday it was on course to report a 2008 loss of up to 28 billion pounds ($40.45 billion), leading the UK government to increase its stake in the lender to nearly 70 per cent. Central banks have cut interest rates sharply in a bid to spark growth, but even that has failed to comfort investors. Britain threw its troubled banks their second lifeline in three months on Monday and gave the Bank of England a green light to pump cash into the ailing economy, but the FTSEurofirst 300 index of top European shares fell 1.6 per cent to its lowest close since Nov. 21. http://timesofindia.indiatimes.com/Business/Asian_stocks_tumble |