Asian Markets Slump on Citigroup Concerns
Asian markets were mostly lower Monday, with bank stocks leading the drop, and so-called safe-haven assets like the yen gained as investors digested the latest news on U.S. measures to prop up Citigroup.
The U.S. government has agreed to guarantee over $300 billion of Citigroup's troubled assets-- loans and securities backed by residential and commercial real estate and other such assets -- with conditions attached. These conditions are still being hammered out. In addition, the Treasury will invest $20 billion in Citi from the Troubled Asset Relief Program in exchange for preferred shares with an 8 percent dividend.
Oil futures edged up. Expectations OPEC might cut output again as early as this week also helped. The dollar fell against the yen, and the euro was also down against the yen.
Australian shares erased losses to end 0.25 percent higher after the U.S. government agreed to pour $20 billion into Citigroup, removing at least one cloud hovering over the market's
heavyweight banking sector. The market had looked poised to follow Wall Street's 6
percent surge from last Friday, but instead it fell on worries about Citi, Australian investment group Babcock & Brown and rising bad debts. The rescue of Citi helped Australian banks pull back from early losses, boosting the index, though analysts warned the Australian market wasn't out of the woods yet.
Seoul shares ended lower after a volatile session led by automakers and some banks, with the positive impact of news of a U.S. government-backed bailout of Citigroup lasting only briefly. Kia Motors plunged 14.85 percent after South Korea's No.2 auto maker said it was paying off 300 million euros ($378.5 million) worth of debt due on Monday in cash. Korea Exchange Bank outperformed, ending a mere 0.54 percent lower after a Seoul court cleared former executives and government officials of charges of understating the value of the bank to sell it for less than it was worth.
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Hong Kong shares fell 1.6 percent with global lender HSBC leading the decline. But gold stocks such as Zijin Mining jumped as the price of the metal hit a five-week high on safe-haven buying. Europe's largest bank, HSBC Holdings, fell 3 percent after it opened at a seven-year low of HK$73. Emerging markets lender Standard Chartered slid after reports that the bank was planning a $3 billion rights issueto boost its capital reserves. The bank has so far been spared the worst of the global financial turmoil.
Singapore's Straits Times Index slipped 2.5 percent with banks such as DBS Group and United Overseas Bank leading the declines.
China's Shanghai Composite Index dropped 3.7 percent, led by banking and property shares as optimism over China's economic stimulus package faded somewhat. Banks were weak in line with drops in banking stocks across the region. Merchants Bank slipped 4 percent. Property shares slid in sympathy with China Merchants Property Development, which was down its 10 percent daily limit as it launched a share offer worth up to 8 billion yuan ($1.2 billion) to help fund real estate projects.
Japan's Nikkei 225 Average is closed for a holiday. Markets will reopen Tuesday. On Friday, the Nikkei climbed 2.7 percent, buoyed by short-covering touched off on hopes of a Wall Street rise and defying increasingly grim economic news, with exporters such as Sony rising.