Asia Weekly

In the News in Asia

Fear and loathing in Asia

Some have smiled at Wall Street's rout and others have profited, but far more could lose out

The story

The notion that Asia has decoupled from the US economy is dead. Initial smugness over America's financial woes gave way to a sense of panic last week as it dawned on regional markets that the worst is yet to come. Asian investors waited with bated breath to gauge sentiment after the US Senate approved Washington's revised $700 billion plan to bail out its troubled financial institutions. Stocks plunged in Tokyo after the US House of Representatives' initial rejection of the package sent global investors scrambling for cover. Hong Kong's benchmark index also plummeted, with China's Ping An Insurance tanking on speculation its 4 percent stake in Fortis was in jeopardy, following the Dutch-Belgian bank's $15.7 billion rescue by the European authorities. Markets across Asia suffered steep declines, with the South Korean won tumbling to its lowest point against the dollar in five and a half years. The overwhelming feeling was that Asia is in for a wild ride as the global financial crisis deepens.

What's being said

Now that "panic" has "engulfed Asia," it's clear we're "all in this mess together," says the Financial Times' Lex column. South Korean banks and the "frothy property markets" in Hong Kong and Singapore are particularly "vulnerable." Europe's nationalization of key financial institutions suggests that "Asia will be next to take the hit," says The Nation (Thailand). The angst has been especially acute in South Korea. We're inching "closer to the abyss," warns the JoongAng Daily. "We need stable management of the foreign exchange market," not clumsy government intervention. Korean companies are on edge now that a "protracted recession" appears imminent, notes the Chosun Ilbo.

Japanese business sentiment is down for the fourth straight quarter, and we're emerging from the "stormiest month in the history of world banking," says the Asahi Shimbun. It's "crucial" that the US steps back from the "brink of depression" and passes a bailout package. America needs to respond immediately, adds Nikkei News, because "crises now spread from country to country much faster." But $700 billion "is a drop in the ocean," argues Anthony Rowley in The Business Times. Washington will have to "stump up far more" before this crisis abates. The turmoil will "do more than years of international prodding to wean" emerging Asia "off its export-led model of economic growth," says Reuters.

What's next

Asian stocks bounced back midway through last week on renewed hope Washington would agree on a revised bailout package, but markets will remain volatile. China's stock markets were closed for the week-long National Day holiday, but analysts expect Beijing to quickly address market fears with a series of measures, including a possible acceleration of plans to introduce margin trading and short selling. Asian credit markets are freezing up as regional banks grow increasingly reluctant to lend to each other, so central banks from Seoul to Singapore will also continue to launch liquidity-boosting measures.

 

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