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.
The US government has signed defense cooperation agreements with Japan and the Philippines to boost the deterrence capabilities of countries in the first island chain, a report by the National Security Bureau (NSB) showed. The main countries on the first island chain include the two nations and Taiwan. The bureau is to present the report at a meeting of the legislature’s Foreign Affairs and National Defense Committee tomorrow. The US military has deployed Typhon missile systems to Japan’s Yamaguchi Prefecture and Zambales province in the Philippines during their joint military exercises. It has also installed NMESIS anti-ship systems in Japan’s Okinawa
TRAGEDY STRIKES TAIPEI: The suspect died after falling off a building after he threw smoke grenades into Taipei Main Station and went on a killing spree in Zhongshan A 27-year-old suspect allegedly threw smoke grenades in Taipei Main Station and then proceeded to Zhongshan MRT Station in a random killing spree that resulted in the death of the suspect and two other civilians, and seven injured, including one in critical condition, as of press time last night. The suspect, identified as a man surnamed Chang Wen (張文), allegedly began the attack at Taipei Main Station, the Taipei Fire Department said, adding that it received a report at 5:24pm that smoke grenades had been thrown in the station. One man in his 50s was rushed to hospital after a cardiac arrest
‘WIN-WIN’: The Philippines, and central and eastern European countries are important potential drone cooperation partners, Minister of Foreign Affairs Lin Chia-lung said Minister of Foreign Affairs Lin Chia-lung (林佳龍) in an interview published yesterday confirmed that there are joint ventures between Taiwan and Poland in the drone industry. Lin made the remark in an exclusive interview with the Chinese-language Liberty Times (the Taipei Times’ sister paper). The government-backed Taiwan Excellence Drone International Business Opportunities Alliance and the Polish Chamber of Unmanned Systems on Wednesday last week signed a memorandum of understanding in Poland to develop a “non-China” supply chain for drones and work together on key technologies. Asked if Taiwan prioritized Poland among central and eastern European countries in drone collaboration, Lin
ON ALERT: Taiwan’s partners would issue warnings if China attempted to use Interpol to target Taiwanese, and the global body has mechanisms to prevent it, an official said China has stationed two to four people specializing in Taiwan affairs at its embassies in several democratic countries to monitor and harass Taiwanese, actions that the host nations would not tolerate, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comments at a meeting of the legislature’s Foreign Affairs and National Defense Committee, which asked him and Minister of National Defense Wellington Koo (顧立雄) to report on potential conflicts in the Taiwan Strait and military preparedness. Democratic Progressive Party (DPP) Legislator Michelle Lin (林楚茵) expressed concern that Beijing has posted personnel from China’s Taiwan Affairs Office to its
RSS