Asian stocks tumbled yesterday as the fallout from growing problems in the US mortgage market snagged one of Australia's highest flying banks and stoked concerns over how much the debacle may ultimately cost.
Dealers said Wall Street losses overnight sparked by trouble at another US company on its exposure to higher risk mortgage loans set the region up for a bad day just as it was recovering from last week's mayhem.
The tone was set in Sydney, down 3.3 percent, where market favorite Macquarie Bank said two high-yielding funds faced losses of up to A$300 million (US$258 million) because of the problems in US sub-prime home loans.
Shares in Macquarie Bank, known for its deal making and massive executive pay-checks, shed 10.7 percent as a result, enough to prompt Australian Treasurer Peter Costello to offer assurances that all was well.
"If you've got exposure in the US market then you'll be affected by US developments ... but I don't see any grounds to see the exposure of these funds in the US will impact on the parent in Australia," he said. "We know that the parent in Australia is a well-capitalized, highly profitable bank."
The issue, however, is that no one really knows yet the full extent of the problem and stock markets, above all else, hate such uncertainty, dealers said.
"I think to a certain extent it's fear of the unknown," CMC Markets senior dealer James Foulsham said of the Australian market. "People don't really know what sort of impact it's going to have. They don't think the full story has come out on this at the moment."
The problem dates to the US housing boom of 2005 and last year when the name of the game was to keep the loan flow going, as lenders spliced and diced the resulting mortgages into ever more exotic securities which were then sold into the global credit markets.
As US interest rates then rose, weaker borrowers defaulted, leaving their mortgages virtually worthless and so undermining the value of these instruments which were bought by investors, many of them institutions.
"Really, with the intricacies of how widespread this can be, investors are beginning to worry. If any more come out, this could steamroll the market," CommSec equities analyst Donahue D'Souza said in Sydney.
This was why the Macquarie Bank news seemed to have had such an impact, raising the specter that many other financial groups may end up in the same boat, said Song Seng Wun, Head of Research at CIMB-GK Research in Singapore.
"We don't know [the impact on Asia] ... We can only watch and see," Song said.
In Tokyo, which fell 2.19 percent, "stocks declined as investors are worried about a further pullback on Wall Street amid spreading worries about the US credit market," said Mitsushige Akino, chief fund manager at Ichiyoshi Management.
"As the economic fundamentals are solid here there are many investors who would like to buy on the dips but they are opting to wait as volatility in the US stock market has been quite high recently," he said.
Elsewhere in the region, Seoul lost 4.0 percent, Mumbai was down 3.08 percent in afternoon trade along with losses of 2.50 percent in Kuala Lumpur.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS