Asian Markets Tumble Sharply, Greenback Rises
Asian stocks dropped sharply Monday after data last week showed a sharp drop in U.S. fourth-quarter growth, and on worries the U.S. government may need to extend additional help to an ailing financial sector.
The U.S. dollar rose broadly after sources said the U.S. government would pour a further $30 billion into embattled insurer American International Group, fueling safety buying of the greenback. The dollar climbed against major currencies other than the yen , and extended its recent gains against the South Korean won to hit another 11-year peak. The AIG move follows a new rescue plan for Citigroup, adding to fears that more financial firms may need similar rescue plans, analysts said. Oil futures fell more than $1 to below $44 a barrel, extending Friday's decline amid fears that the ailing global economy would further damage energy demand.
The Nikkei 225 Average slid 3.8 percent, with Mitsubishi UFJ Financial Group and other banks dropping on concerns about the U.S. financial sector while exporters fell on worry about the U.S. economy. Sony fell 0.48 percent after the company said on Friday that CEO Howard Stringer would double up as president and directly oversee the company's ailing electronics division. Banks skidded, with the banking index down 3.8 percent, after the U.S. government said it would take a large stake in Citigroup's common shares, fanning fears it will increase its role in other major banks.
South Korea's KOSPI ended down 4.1 percent to hit a three-month low with financials, crude refiners and auto issues under pressure. The won dropped over 2 percent to hit a fresh 11-year low against the dollar on Monday. South Korean exports in February fell 17.1 percent from a year earlier, according to the government. Falls were led by financials, with Shinhan Financial Group and Hana Financial Group both retreating 4.8 percent.
Australian stocks closed down 2.8 percent to their lowest close since December 2003, driven down by the top miners and financials after Moody's revised the rating outlooks of several top banks to negative. Gloomy domestic economic data underlined the risk that Australia's economy was slipping close to a recession, following Friday's news of a sharp U.S. contraction. Australian banks struggled all day and extended losses after Moody's revised its ratings outlook on Westpac Banking,Australia and New Zealand Banking Group and Commonwealth Bank, citing the potential impact of the economic downturn. Westpac led the decline, falling 3.5 percent, no. 3 lender CBA fell 4.3 percent while ANZ lost 1.6 percent.
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Hong Kong shares slid 3.9 percent, with banking and property stocks sold down sharply on increasing worries about the stability of the global financial sector. Shares in HSBC's local arm, Hang Seng Bank were 3.2 percent lower at the close. HSBC was suspended from trade earlier, ahead of what sources said will be a $18 billion rights issue to be announced alongside its 2008 results.
Singapore's Straits Times Index was down 3.9 percent. Shares of United Overseas Bank, Singapore's second-largest lender, fell 7.4 percent to a six-year low on Monday after brokers cut their price targets for the bank following last week's poor earnings result. Credit Suisse downgraded its rating on the bank to "neutral" from its previous "outperform" and cut its target price to S$12.00 from S$14.75.
China's Shanghai Composite Index ended 0.5 percent higher after brokerage CLSA's Purchasing Managers' Index (PMI) showed deterioration in the Chinese manufacturing sector slowing. CLSA's PMI rose to a seasonally adjusted 45.1 in February, climbing further from a record low of 40.9 hit in November and gaining from 42.2 in January. The pace of decline in both output and new orders eased. In addition to improvement in economic data, the market is hoping for a formal expansion of China's 4 trillion yuan, two-year economic stimulus plan, which could be announced as soon as this week's annual meeting of parliament. Many analysts think the plan could be expanded to around 6 trillion yuan.