Asian markets tumble after Wall Street's slide

Posted in United States , Asia | 01-Aug-07 | Source: International Herald Tribune

A Thai investor looks on as shares are traded at a private company in Bangkok.

BANGKOK, Thailand: Asian and European markets fell Wednesday after Wall Street resumed its slide from last week amid concerns that problems with U.S. housing loans could spread and drag on global growth.

Japanese stocks sank 2.2 percent to a four-and-half-month low, Hong Kong's market fell 3.2 percent, and South Korean shares plunged 4 percent. Indian stocks also sank 4 percent.

Chinese stocks, which had shrugged off the global market turmoil until now, retreated from record highs. The benchmark Shanghai Composite Index fell 3.8 percent.

In Australia, worries that U.S. subprime mortgage woes were spreading rose after Fortress Investments Ltd., the high-yield fund manager of Macquarie Bank Ltd., said late Tuesday that investors in its two funds face losses of up to 25 percent, affected by price volatility in the U.S. credit market.

The funds weren't directly exposed to U.S. subprime mortgages, but problems in that sector have pushed down the value of riskier investments in credit markets generally. And while Macquarie Bank doesn't have any direct exposure to the funds, the bank's shares tumbled 10.7 percent to A$73.70 (US$63.30), helping drag down Sydney's benchmark S&P/ASX 200 index 3.3 percent.

The slide in Asian markets came after they had staged a modest recovery Monday and Tuesday following sharp declines Friday triggered by a plunge on Wall Street late last week.

But the Dow Jones industrial average fell again Tuesday — sinking 1.1 percent to 13,211.99 — sending more jitters through Asian markets as investors worried that the U.S. housing loan problems could drag on the U.S. economy, a key export market, and cause investors to pull out of Asian stocks.

"We are looking at whether this is just a good correction or if it's the start of something bigger," said Song Seng Wun, head of research at CIMB-GK Research in Singapore. "If the U.S. remains stable, with consumers gainfully employed, then we will be okay.

Foreign investors were bailing out of South Korean shares, traders said, causing the Korea Composite Stock Price Index, or Kospi, to drop 4 percent to 1,856.45, the lowest close in a month.

In European trading, the U.K. FTSE 100 index fell 1.9 percent to 6,241.90, Germany's DAX 30 index was down 1.5 percent at 7,469.71 and the French CAC-40 index dropped 2.2 percent to 5,626.05.

Deutsche Bank AG fell more than 2.6 percent as part of the wider decline in global markets, even after saying its second-quarter profit surged 31 percent as its investment banking business proved to be solid amid global market jitters and said its exposure to the subprime mortgage market, or real estate loans made to borrowers with weak credit histories, was not significant.

Similarly, French bank BNP Paribas fell 2.3 percent after posting a 20 percent jump in second-quarter net profit and saying that it is hardly affected by the current subprime mortgage crisis or by tensions in the leveraged buyout market.

Beyond worries over the U.S. market, Japanese investors also fretted over disappointing earnings from the nation's megabanks and political fallout from last weekend's elections.

Agriculture Minister Norihiko Akagi, who was embroiled in a funding scandal, resigned Wednesday to take responsibility for the ruling party's defeat in Sunday's upper house election. He is the fourth minister to leave an increasingly unpopular Cabinet.

Tokyo's Nikkei 225 fell 377.91 points, or 2.2 percent, to 16,870.98 points, the lowest since March 16.

In currency trading, the dollar was trading at 118.08 yen at 2:50 p.m. (0550 GMT), down from 119.30 yen late Tuesday in New York. The euro fell to US$1.3648 from US$1.3703.