AI
That's it -- buyers have been defeated
Asian stocks swept up in global selloff as US recession fears mount UPDATE2
January 22, 2008: 01:39 AM EST
SINGAPORE, Jan. 22, 2008 (Thomson Financial delivered by Newstex) -- Asian stocks tumbled for a second straight session Tuesday, swept up in the global selloff sparked by worry that the US is headed for a recession that will dent export markets across the world.
With the US closed Monday for the Martin Luther King holiday, Asian markets took their cue from Europe and Latin America -- benchmarks in France, Germany and Brazil plunged about 7 percent overnight, their worst declines since just after the terror attacks of Sept 11, 2001.
'There is a growing fear out there that the slowdown in the US is now spreading to other parts of the world,' said Howard Gorges, vice chairman at South China Securities. 'Sentiment on the global economy and stock markets has suddenly become panicky.'
The Hang Seng plunged 8 percent to 21,904.
'That's it -- buyers have been defeated. They have finally run out of money and brokers are now making margin calls,' said Andrew Clarke, trader with SG Securities.
The S&P/ASX 200 was down 7.1 percent at 5,186.8 and the All Ordinaries lost 7.3 percent to 5,222, their worst performance since October 1997.
The Australian market has fallen for twelve straight sessions.
'It's hard to describe it as anything else but complete carnage,' said Justin Gallagher, head of sales trading at ABN Amro. (NYSE:ABN)
The Nikkei was last down 4.9 percent at 12,672, trading below 13,000 for the first time since October 2005.
The South Korean Kospi was down 4.5 percent at 1,608.56, the Shanghai Composite lost 5.5 percent to 4,644 and the Taiwanese Taiex was down 6.5 percent to 7,581.96.
The Philippines Composite was down 5.5 percent at 2,978 and the Singapore Straits Times lost 4.8 percent to 2,776.37, a level last seen in December 2006.
The Jakarta Composite fell 9.1 percent at 2,259.65.
'If, during the bull market last year, almost all stocks were worth buying, now everything is a 'sell',' said Cece Ridwanulloh, a fund manager at Ekokapital Sekuritas in Jakarta.
Global markets slumped Monday as investors concluded that the 145 billion-dollar stimulus package unveiled by President Bush on Monday comes too late to stop the world's biggest economy from sliding into recession.
Investors are increasingly nervous about the financial sector following massive writedowns by the big US investment banks in the fourth quarter.
'Unless the US government decides to inject public funds into resolving the subprime loan issue, fears about the credit crunch may not go away,' said Osamu Tamada, a Mizuho Investors Securities strategist.
US poised for losses
The US market is expected to fall hard when it resumes trade later today. Futures on the Dow Jones Industrial Average were last quoted down 516 points, while S&P futures were down 66 points, signalling heavy selling at the open.
Investors are not just nervous about the likelihood of a US recession. They are also worried that banks around the world are facing another round of writedowns on securities related to the US subprime sector.
On Monday, German state-owned bank WestLB said it expects a pretax loss of about 1 billion euros for 2007, mostly due to 1 billion euros in subprime-related writedowns.
Other German banks, including SachsenLB and Landesbank Baden-Wuerttemberg, have had to make painful adjustments because of their exposure to the subprime meltdown.
Elsewhere in Europe, UBS (NYSE:UBS) , Barclays (NYSE:BCS) and Royal Bank of Scotland have also recorded billions of dollars in writedowns.
Speculation is growing that some of France's big banks are poised to announce writedowns.
Societe Generale shares tumbled Monday on talk that it has bigger exposure to the troubled sector than previously understood.
SocGen shares fell 8 percent, extending an 8.6 percent loss from Friday, while BNP Paribas (OOTC:BPRBF) lost 9.6 percent.
Even more ominous is the precarious outlook for the big US bond insurers after Fitch downgraded Ambac last week after it scrapped a plan to raise capital.
Analysts are expecting other ratings agencies to follow suit, a move which would mean the bonds guaranteed by Ambac will also be downgraded -- forcing the holders of those bonds to write down their value.
The seven Triple-A-rated bond insurers back about 2.4 trillion dollars of debt, 'so it's easy to see the scale of the problem we all face if this house of cards is allowed to collapse,' said analysts at Deutsche Bank. (NYSE:DB)
'The risks are so serious that one has to believe that negotiations to avoid it are currently going on behind closed doors,' they said in emailed comments.
Fear factor
'The market is being driven by fear right now and the current fear is of a major insolvency in the US,' said Andrew Pease, an investment strategist at Russell Investment Group in Sydney.
'It will be interesting how the US market opens up tonight but what's more important is how it finishes - a lot now depends on the Fed (US Federal Reserve) because that's the one organisation that can break the current catalyst for change.'
The Federal Open Market Committee meets on Jan 30 with some market commentators expecting it to decide on a federal funds target rate cut of as much as 75 percentage points.
Pease said markets panic at times even though market fundamentals remain sound with forward price earnings multiples very low, even taking into account the possibility of a 20 percent downgrade in current estimates.
'Our advice to our investors is just to sit tight and focus on longer-term fundamentals and don't panic,' he said.
'We know that markets move through waves of fear and greed every now and then and right now there's as much fear as there's ever been.'
Asian stock markets have fallen hard in 2008 so far.
The Nikkei has lost 17.5 percent, extending the 11 percent decline suffered in 2007. The Indian Sensex is down 22 percent, the Philippines down 18 percent and the Kospi off 16 percent.
Even the Shanghai Composite, the market darling for the last two years, is down 12 percent so far.
Financials battered
Against this background, financial stocks slumped across Asia. Bank of China, which has the biggest subprime exposure among Chinese lenders, lost 8.6 percent to 3.08 Hong Kong dollars.
China's biggest bank Industrial and Commercial Bank of China (OOTC:IDCBF) fell 11.1 percent to 4.32 dollars.
HSBC Holdings shed 6.3 percent at 106.40 dollars.
Ping An Insurance Group extended its fall, down 11.8 percent to 60 dollars, as investors feared its plan to sell new shares and bonds worth about 160 billion yuan may dilute earnings.
In Australia, ANZ Bank lost 3.4 percent to 25.33 Australian dollars and Commonwealth Bank lost 3.3 percent to 49.13. National Australia Bank (OOTC:NABZY) fell 4.9 percent to 33.47.
In Tokyo, Mizuho Financial Group (NYSE:MFG) was down 5.4 percent at 439,000 yen, Mitsubishi UFJ Financial down 2.4 percent at 893, and Sumitomo Mitsui Finanical Group down 4.1 percent at 728,000. Japan's biggest stock broker Nomura Holdings (NYSE:NMR) was down 3.9 percent at 1,415.
Exporters were hurt by the strong yen. Sony (NYSE:SNE) declined 5.1 percent to 5,210, printer maker Canon shed 4.3 percent at 4,250, construction machinery maker Komatsu slipped 6.9 percent to 2,235 and Toyota Motor (NYSE:TM) was down 290 yen or 5.5 percent at 4,970.
ciara.linnane@thomson.com
Asian stocks swept up in global selloff as US recession fears mount UPDATE2
January 22, 2008: 01:39 AM EST
SINGAPORE, Jan. 22, 2008 (Thomson Financial delivered by Newstex) -- Asian stocks tumbled for a second straight session Tuesday, swept up in the global selloff sparked by worry that the US is headed for a recession that will dent export markets across the world.
With the US closed Monday for the Martin Luther King holiday, Asian markets took their cue from Europe and Latin America -- benchmarks in France, Germany and Brazil plunged about 7 percent overnight, their worst declines since just after the terror attacks of Sept 11, 2001.
'There is a growing fear out there that the slowdown in the US is now spreading to other parts of the world,' said Howard Gorges, vice chairman at South China Securities. 'Sentiment on the global economy and stock markets has suddenly become panicky.'
The Hang Seng plunged 8 percent to 21,904.
'That's it -- buyers have been defeated. They have finally run out of money and brokers are now making margin calls,' said Andrew Clarke, trader with SG Securities.
The S&P/ASX 200 was down 7.1 percent at 5,186.8 and the All Ordinaries lost 7.3 percent to 5,222, their worst performance since October 1997.
The Australian market has fallen for twelve straight sessions.
'It's hard to describe it as anything else but complete carnage,' said Justin Gallagher, head of sales trading at ABN Amro. (NYSE:ABN)
The Nikkei was last down 4.9 percent at 12,672, trading below 13,000 for the first time since October 2005.
The South Korean Kospi was down 4.5 percent at 1,608.56, the Shanghai Composite lost 5.5 percent to 4,644 and the Taiwanese Taiex was down 6.5 percent to 7,581.96.
The Philippines Composite was down 5.5 percent at 2,978 and the Singapore Straits Times lost 4.8 percent to 2,776.37, a level last seen in December 2006.
The Jakarta Composite fell 9.1 percent at 2,259.65.
'If, during the bull market last year, almost all stocks were worth buying, now everything is a 'sell',' said Cece Ridwanulloh, a fund manager at Ekokapital Sekuritas in Jakarta.
Global markets slumped Monday as investors concluded that the 145 billion-dollar stimulus package unveiled by President Bush on Monday comes too late to stop the world's biggest economy from sliding into recession.
Investors are increasingly nervous about the financial sector following massive writedowns by the big US investment banks in the fourth quarter.
'Unless the US government decides to inject public funds into resolving the subprime loan issue, fears about the credit crunch may not go away,' said Osamu Tamada, a Mizuho Investors Securities strategist.
US poised for losses
The US market is expected to fall hard when it resumes trade later today. Futures on the Dow Jones Industrial Average were last quoted down 516 points, while S&P futures were down 66 points, signalling heavy selling at the open.
Investors are not just nervous about the likelihood of a US recession. They are also worried that banks around the world are facing another round of writedowns on securities related to the US subprime sector.
On Monday, German state-owned bank WestLB said it expects a pretax loss of about 1 billion euros for 2007, mostly due to 1 billion euros in subprime-related writedowns.
Other German banks, including SachsenLB and Landesbank Baden-Wuerttemberg, have had to make painful adjustments because of their exposure to the subprime meltdown.
Elsewhere in Europe, UBS (NYSE:UBS) , Barclays (NYSE:BCS) and Royal Bank of Scotland have also recorded billions of dollars in writedowns.
Speculation is growing that some of France's big banks are poised to announce writedowns.
Societe Generale shares tumbled Monday on talk that it has bigger exposure to the troubled sector than previously understood.
SocGen shares fell 8 percent, extending an 8.6 percent loss from Friday, while BNP Paribas (OOTC:BPRBF) lost 9.6 percent.
Even more ominous is the precarious outlook for the big US bond insurers after Fitch downgraded Ambac last week after it scrapped a plan to raise capital.
Analysts are expecting other ratings agencies to follow suit, a move which would mean the bonds guaranteed by Ambac will also be downgraded -- forcing the holders of those bonds to write down their value.
The seven Triple-A-rated bond insurers back about 2.4 trillion dollars of debt, 'so it's easy to see the scale of the problem we all face if this house of cards is allowed to collapse,' said analysts at Deutsche Bank. (NYSE:DB)
'The risks are so serious that one has to believe that negotiations to avoid it are currently going on behind closed doors,' they said in emailed comments.
Fear factor
'The market is being driven by fear right now and the current fear is of a major insolvency in the US,' said Andrew Pease, an investment strategist at Russell Investment Group in Sydney.
'It will be interesting how the US market opens up tonight but what's more important is how it finishes - a lot now depends on the Fed (US Federal Reserve) because that's the one organisation that can break the current catalyst for change.'
The Federal Open Market Committee meets on Jan 30 with some market commentators expecting it to decide on a federal funds target rate cut of as much as 75 percentage points.
Pease said markets panic at times even though market fundamentals remain sound with forward price earnings multiples very low, even taking into account the possibility of a 20 percent downgrade in current estimates.
'Our advice to our investors is just to sit tight and focus on longer-term fundamentals and don't panic,' he said.
'We know that markets move through waves of fear and greed every now and then and right now there's as much fear as there's ever been.'
Asian stock markets have fallen hard in 2008 so far.
The Nikkei has lost 17.5 percent, extending the 11 percent decline suffered in 2007. The Indian Sensex is down 22 percent, the Philippines down 18 percent and the Kospi off 16 percent.
Even the Shanghai Composite, the market darling for the last two years, is down 12 percent so far.
Financials battered
Against this background, financial stocks slumped across Asia. Bank of China, which has the biggest subprime exposure among Chinese lenders, lost 8.6 percent to 3.08 Hong Kong dollars.
China's biggest bank Industrial and Commercial Bank of China (OOTC:IDCBF) fell 11.1 percent to 4.32 dollars.
HSBC Holdings shed 6.3 percent at 106.40 dollars.
Ping An Insurance Group extended its fall, down 11.8 percent to 60 dollars, as investors feared its plan to sell new shares and bonds worth about 160 billion yuan may dilute earnings.
In Australia, ANZ Bank lost 3.4 percent to 25.33 Australian dollars and Commonwealth Bank lost 3.3 percent to 49.13. National Australia Bank (OOTC:NABZY) fell 4.9 percent to 33.47.
In Tokyo, Mizuho Financial Group (NYSE:MFG) was down 5.4 percent at 439,000 yen, Mitsubishi UFJ Financial down 2.4 percent at 893, and Sumitomo Mitsui Finanical Group down 4.1 percent at 728,000. Japan's biggest stock broker Nomura Holdings (NYSE:NMR) was down 3.9 percent at 1,415.
Exporters were hurt by the strong yen. Sony (NYSE:SNE) declined 5.1 percent to 5,210, printer maker Canon shed 4.3 percent at 4,250, construction machinery maker Komatsu slipped 6.9 percent to 2,235 and Toyota Motor (NYSE:TM) was down 290 yen or 5.5 percent at 4,970.
ciara.linnane@thomson.com
Solar Stocks #board-11148
Peak Oil #board-6609
Coal #board-2809
Real Estate Bubble #board-7285
Lender Implosion #board-10076
HomeBuilders #board-1680
Your Economy #board-1948
Global Warming #board-11877
Discover What Traders Are Watching
Explore small cap ideas before they hit the headlines.
