Asia stocks fall on US financial worries

July 15th, 2008 - 6:01 pm ICT by David M N James  

Asia markets fell sharply as worries mount over US financials. On Tuesday, the investor confidence in the U.S. financial system was minimal regardless of a government-backed plan to help limping mortgage financiers Fannie May and Freddie Mac.

The Hang Seng was down 3.2 percent, In Tokyo; the Nikkei 225 index shed 2 percent to 12,750.10. Every major index was in the red by midday, and Taiwan’s benchmark losing nearly 4 percent at one point. Losses were made across major sectors across Asia. Banks were badly off as investors worried that trouble in the U.S. financial markets would spillover to Asia. Bad fourth estate news on this downturn made it worse in Japan where a local business newspaper reported that the country’s top three banks hold a combined 4.7 trillion yen ($44 billion) in Fannie May and Freddie Mac debt.

Fannie May and Freddie Mac are two government-chartered companies. They received a shot in the arm on Sunday when the U.S. central bank and Treasury Department promised to step in with short-term funding and other aid should mortgage losses mount. Together, the companies hold or back about half the outstanding mortgages in the United States. On Monday, the Dow Jones industrial average fell 45.35, or 0.41 percent, to 11,055.19 after spiking nearly 140 points in early trading. According to Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong, “Investors are quite concerned we could be heading toward a meltdown in the equities market if there’s no rebuilding in confidence, especially in the U.S.,”

Japans banking giant Mizuho Financial Group Inc.’s shares dipped 3.5 percent and Mitsubishi UFJ Financial Group Inc. was down nearly 4 percent. In China, China’s biggest lender, ICBC, lost 5.1 percent in Hong Kong trading and China Construction Bank went down 4.9 percent. China’s index in Shanghai was off 2.5 percent while in South Korea’s, the benchmark slid 2.6 percent, India’s Sensex lost 2.3 percent and Australia’s main index slipped 2.3 percent.

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