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Asian Markets Sink on US Recession Fears

CNBC.com
Wednesday, 16 Jan 2008 | 5:07 AM ET

Asian markets took a severe beating Wednesday on growing concern the U.S. economy would slump into a prolonged recession. Hong Kong's Hang Seng ended 5.4 percent lower and Japan's Nikkei index plunged over 3 percent. Even the best performing of the benchmark indexes, the Bombay Sensex, suffered a loss of 1.8 percent.

In the U.S. Tuesday, all three major stock indexes closed down more than 2 percent after a record quarterly loss for Citigroup and a fall in key December retail sales exacerbated fears of a recession. Retail sales fell unexpectedly in December to close out the the weakest year since 2002.

In early Asian trade the U.S. dollar dropped to 106.59 yen, the lowest since June 2005, before recovering some poise to trade at 106.75 yen on market talk that the Federal Reserve was holding an emergency meeting to cut interest rates immediately.

Adding to woes, results from Intelreleased after the U.S. market closed, fell short of estimates and its outlook was below forecasts, sending its shares down nearly 15 percent and boding ill for Asian tech stocks that depend heavily on U.S. demand.

News that Citigroup and Merrill Lynch had raised another $20 billion of capital from investors also quickened worries that the worst confessions from financial institutions are yet to come, adding downward pressure on regional bank stocks.

Japan's Nikkei 225 Average shed 3.35 percent, to close at a 26-month low. Mizuho Financial Group tumbled after it said that its core banking unit would buy $1.2 billion worth of the $6.6 billion in stock being raised by Merrill Lynch. Fellow bank Mitsubishi UFJ Financial Group slid after Kyodo news agency, citing sources close to the matter, said the banking giant had subprime-loan-related losses estimated at some 50 billion yen at the end of last year. Exporters such as Honda and Sony were also lower, weighed down a surging yen.

South Korea's KOSPI dropped 2.4 percent to a five-month closing low, after dismal U.S. economic data and Citigroup's record loss fueled U.S. recession fears, sending foreign investors
rushing for the exits.

Australia's S&P/ASX 200 Index tumbled 2.5 percent, extending a run of declines to an eighth
session and the longest in over seven years, as worries about U.S. consumer spending sent
investors scurrying out of risky stocks. Miners and resource stocks, which have withstood recent market weakness, were not immune this session as worries about falling demand in the United States and China hurt commodities prices. BHP Billiton and Rio Tinto both declined.

Hong Kong blue chips and China plays tumbled 5.4 percent in line with the selloff across Asia. Heavyweights China Mobile and HSBC Holdings dropped sharply, having earlier hit lows not seen since August 2004.

Singapore's Straits Times Index fell over 2 percent with losses across the board. Singapore Exchange took a sharp hit, down as much as 7 percent after three brokers downgraded their target prices for the bourse operator.

China's Shanghai Composite Index tumbled 2.8 percent, led by financial and property stocks, sparked by a selloff in global stock markets amid fears that the U.S. economy may slide into recession.

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