Sun, Jul 16, 2006 - Page 10 News List

Asian stocks suffer amid litany of worldwide woes

REGIONAL TRADING The positive potential of Japan's rate increase was eradicated by North Korea's missile tests, Israeli attacks on Lebanon and blasts in Mumbai


Asian stock markets were hit badly on Friday as escalating violence in the Middle East pushed oil prices to record highs and added to a litany of geopolitical concerns sapping investor confidence.

Dealers said the backdrop was uniformly negative, with the losses an unwelcome reminder of the dark days of May and last month as investors moved from one concern to another with little hope of early relief.

They said that oil prices at US$78 a barrel, and talk of US$100 if Israeli attacks on Lebanon spark a wider Middle East conflict, rattled nerves given the likely impact on inflation and interest rates.

The markets were mindful that oil prices were getting close in real terms to levels last seen in the 1979 "oil shock," which plunged the Western economies into a deep recession marked by very high inflation and interest rates.

Then there was the continued fallout from North Korea's salvo of missile launches last week and a sharp increase in regional tensions, particularly after Japan mooted the possibility of pre-emptive attack if it ever felt it was in danger from Pyongyang.

The blasts on Tuesday on Mumbai commuter trains added to the nervousness given their potential to inflame Pakistan-India relations if the finger of blame was to be pointed at Islamabad.

Against these woes, the potentially positive impact of the Bank of Japan's first hike in interest rates in more than five years was lost on the markets, with Tokyo itself losing 1.67 percent.


In Taipei share prices closed sharply lower, falling 2.13 percent as investors took their lead from heavy losses on Wall Street amid record oil prices and rising tensions in the Middle East, dealers said.

They said the market was likely to remain under pressure as broader concerns -- geo-political tensions, high oil prices and upcoming quarterly corporate results -- keep buyers at bay.

The weighted index lost 139.57 points at 6,428.03, just off the low of 6,413.92, on turnover of NT$73.58 billion (US$2.25 billion).

Decliners led risers 926 to 89, with 62 stocks unchanged.

"Weakness across global bourses prompted foreign investors to cash out of the market," SinoPac Securities (建華證券) assistant vice president Alvin Teng (鄧可欣) said.


Japanese share prices sank to a three-week low on concerns over escalating violence in the Middle East and record high oil prices, while the end of Japan's zero interest rates had little impact, dealers said.

They said that the Bank of Japan's decision to raise its key rate by a quarter point to 0.25 percent had been well expected by financial markets, which reacted calmly to the news.

The Tokyo Stock Exchange's benchmark NIKKEI-225 index fell 252.71 points or 1.67 percent to 14,845.24, the weakest finish since June 21. The broader TOPIX index of all first-section issues lost 29.32 points or 1.89 percent to 1,521.71.

Losers led gainers 1,490 to 163, with 43 stocks unchanged.

"A fall in US stocks and the surge in crude oil prices were the decisive factors that pushed down the Japanese market," said Hideo Mizutani, a chief strategist at Sieg Securities.

"A surge in oil prices could hurt US companies' earnings and slow down the economy, thereby damaging Japanese companies," Mizutani said.

He said the Bank of Japan's decision to scrap zero-interest rates policy was widely anticipated and now the market will be looking ahead to upcoming corporate results for their next lead.

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