Asian shares sank yesterday on fears that a deepening US financial sector crisis and soaring oil costs would further sap faltering world economic growth.
The plunge came as concerns grew about the solvency of US mortgage finance titans Fannie Mae and Freddie Mac, which underpin trillions of dollars in home loans and whose failure would be viewed as catastrophic.
Japan, Asia’s biggest bourse, slid nearly 2 percent, Taiwan tumbled 4.5 percent, Hong Kong fell 3.8 percent and China closed down some 3.5 percent even though the US government has just extended a lifeline to the mortgage giants.
“The market has been absolutely savaged today,” said Dominic Vaughan, a senior dealer at CMC Markets in Australia, where the stock market ended more than 2 percent down.
“There is still a belief that any measures done by the US government or the US Federal Reserve may not be enough,” he said.
The US plan announced on Sunday provides access to substantially increased credit to the two firms, which own or guarantee almost half of all US home loans and are in crisis owing to the worst US housing downturn in decades.
But the initiative has so far failed to patch up investor confidence, which had already been shredded by slowing economic growth and falling business profits as inflation surges thanks to soaring crude oil and food prices.
Oil was trading at around US$145 per barrel yesterday, only a little shy of all-time highs above US$147 scaled last week. The price of black gold has doubled over the past year and is up five-fold since 2003.
Elsewhere in Asia, Indian shares plunged 4 percent, Singapore was more than 3 percent down and South Korea closed 3.2 percent lower as trading screens across the region turned red.
“We may witness more selling pressure in the near term on concerns that the worst of the US credit crisis is not over yet,” Linus Yip at First Shanghai Investments in Hong Kong told Dow Jones Newswires.
Asia’s smaller markets also suffered, with New Zealand share prices hitting a three-year low after a 1.3 percent slide. Indonesian shares were down more than 1 percent, while the Philippine market closed 1.79 percent lower.
“Negative global news is keeping investors away,” said Bhaskar Kapadia of Pyramid Securities in India.
Yesterday’s slide continued this year’s rout, with the Asia-Pacific stock market as a whole down approximately 18 percent since the start of the year.
Shares began sliding last year after a default crisis among “subprime” — or riskier — US mortgages emerged. Banks have lost billions of dollars on investments tied to the mortgages, precipitating a global credit crunch.
Investors are anxiously waiting for results this week from key US financial companies, which could reveal yet more subprime-related losses.
China, which is battling high inflation, is also scheduled to release economic data.
European shares also sank yesterday and investors were braced for more volatility on Wall Street later in the day.
Authorities have detained three former Taiwan Semiconductor Manufacturing Co (TMSC, 台積電) employees on suspicion of compromising classified technology used in making 2-nanometer chips, the Taiwan High Prosecutors’ Office said yesterday. Prosecutors are holding a former TSMC engineer surnamed Chen (陳) and two recently sacked TSMC engineers, including one person surnamed Wu (吳) in detention with restricted communication, following an investigation launched on July 25, a statement said. The announcement came a day after Nikkei Asia reported on the technology theft in an exclusive story, saying TSMC had fired two workers for contravening data rules on advanced chipmaking technology. Two-nanometer wafers are the most
NEW GEAR: On top of the new Tien Kung IV air defense missiles, the military is expected to place orders for a new combat vehicle next year for delivery in 2028 Mass production of Tien Kung IV (Sky Bow IV) missiles is expected to start next year, with plans to order 122 pods, the Ministry of National Defense’s (MND) latest list of regulated military material showed. The document said that the armed forces would obtain 46 pods of the air defense missiles next year and 76 pods the year after that. The Tien Kung IV is designed to intercept cruise missiles and ballistic missiles to an altitude of 70km, compared with the 60km maximum altitude achieved by the Missile Segment Enhancement variant of PAC-3 systems. A defense source said yesterday that the number of
A bipartisan group of US representatives have introduced a draft US-Taiwan Defense Innovation Partnership bill, aimed at accelerating defense technology collaboration between Taiwan and the US in response to ongoing aggression by the Chinese Communist Party (CCP). The bill was introduced by US representatives Zach Nunn and Jill Tokuda, with US House Select Committee on the Chinese Communist Party Chairman John Moolenaar and US Representative Ashley Hinson joining as original cosponsors, a news release issued by Tokuda’s office on Thursday said. The draft bill “directs the US Department of Defense to work directly with Taiwan’s Ministry of National Defense through their respective
Tsunami waves were possible in three areas of Kamchatka in Russia’s Far East, the Russian Ministry for Emergency Services said yesterday after a magnitude 7.0 earthquake hit the nearby Kuril Islands. “The expected wave heights are low, but you must still move away from the shore,” the ministry said on the Telegram messaging app, after the latest seismic activity in the area. However, the Pacific Tsunami Warning System in Hawaii said there was no tsunami warning after the quake. The Russian tsunami alert was later canceled. Overnight, the Krasheninnikov volcano in Kamchatka erupted for the first time in 600 years, Russia’s RIA