Asian Markets Tumble on Global Banking Woes
Asian markets slumped Tuesday on concerns that increasing woes in the global financial sector will deepen the world's economic downturn, highlighting the difficulties confronting incoming U.S. President Barack Obama.
The tumble came after Royal Bank of Scotland on Monday unveiled the biggest loss in British corporate history. That news erased earlier gains made on news of a second UK government bailout for ailing banks. Sterling fell to its lowest in almost seven years and the euro dropped to a six-week low, while U.S. stock futures slumped, signaling a potentially tough
day ahead for Wall Street.
Asian banking shares from HSBC to Japanese top lender Mitsubishi UFJ Financial Group were among the leading decliners in the region as worries intensify about a sector facing more credit and loan-related writedowns.
Governments worldwide are grappling with how to get their banks lending again to revive economies, despite already injecting billions of dollars and implementing other measures such as backing some of their debt. Central banks have cut interest rates sharply in a bid to spark growth, but even that has failed to comfort investors.
The ongoing financial woes saw the U.S. dollar and the euro fall, as Spain's credit rating was cut and fears grew of other rating cuts in the euro zone, with the yen gaining on a flight to safer assets. Commodity prices were lower, led by falling crude oil prices on the ceasefire in Gaza and the gas deal signed between Russia and Ukraine.
Japan's Nikkei 225 Average slid 2.3 percent as deepening trouble in the global financial sector hurt bank shares such as Mizuho Financial Group, while a stronger yen sparked selling of exporter shares. Traders said investors were taking their cues from a drop in U.S. stock futures which were down about 1.4 percent after European shares were hurt by RBS' profit loss. But Toyota Motor closed 2.3 percent higher after the company named a new president.
Seoul shares finished 2 percent lower led by banks including Hana Financial after news of a UK peer's massive losses, but shares in No. 2 wireless carrier KTF rose on expectations it would merge with KT. Hana Financial Group fell 6.57 percent, and KTF ended 2.11 percent higher.
Australian stocks fell 3.1 percent to their lowest close in two months, led down by miners and banks as renewed fears over the state of the global economy cancelled out optimism over government rescue packages worldwide. Banks took a hit, following their European peers. Resource companies fell after a decline in commodity prices, with investors awaiting a production report from top miner BHP Billiton on Wednesday. Analysts have been marking
down their forecasts for BHP's output as demand slows amid the global downturn.
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Hong Kong shares were led lower by index heavyweight HSBC,down 7.7 percentas dim earnings prospects for the financial sector added to worries over a worsening global economy. Sentiment for Chinese banks was also affected by worries over the
repercussions of Royal Bank of Scotland's announcement of huge losses. China CITIC Bank, the country's seventh-largest lender, retreated on profit-taking after Monday's rise and after it said that its 2008 net profit probably rose 60 percent despite the global financial crisis.
Singapore's Straits Times Index fell 1.4 percent led by losses in banking stocks such as DBS Group as investors fretted over the health of the global financial sector. DBS dropped 0.3 percent, Oversea-Chinese Banking fell 1.7 percent and United Overseas Bank was 2.5 percent lower.
China's Shanghai Composite Index swung back into the black, edging up 0.4 percent. But property and other blue chips were soft in line with weak Asian markets, but steel shares outperformed after Baoshan Iron and Steel hiked prices for March. China Vanke, the country's largest listed property firm, sank while the market's biggest stock, PetroChina, also sagged.