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Asian, European markets tumble as worries mount over US
Published in Saudi Press Agency on 15 - 07 - 2008


Asian and European stock markets fell
Tuesday as investor confidence in the U.S. financial system
eroded further despite a government-backed plan to help
beleaguered mortgage financiers Fannie Mae and Freddie Mac, AP reported.
In morning trading in Europe, Britain's FTSE 100 fell 1.27
percent to 5,233.10, Germany's DAX lost 1.80 percent at
6,088.40 and France's CAC-40 retreated 1.51 percent to
4,079.91.
In Asia, every major index suffered declines, with Hong
Kong's Hang Seng Index dropping more than 3.8 percent and
Taiwan's benchmark losing over 4.5 percent. In Tokyo, the
Nikkei 225 index dropped nearly 2 percent to close at
12,754.56.
While losses spread across most sectors in Asia,
financials were hit particularly hard as investors worried
that trouble in the U.S. financial markets would spillover
to Asia.
Japanese traders were rattled by a local business
newspaper report that the country's top three banks hold a
combined 4.7 trillion yen (US$44 billion) in Fannie Mae and
Freddie Mac debt. Another newspaper report unnerved
Taiwan's market with news that at least two leading
financial institutions have invested in the mortgage
giants, and the country's central bank may also have
purchased their bonds.
In China, rumors were circulating that the Chinese
government had also invested in Fannie and Freddie bonds.
The two government-chartered companies received a boost
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.
A sell-off of regional banks overnight on Wall Street, as
well as fears that other American banks might face
difficulties ahead, only added to the unease. 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.
«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.,» said Alex Tang,
head of research at Core Pacific-Yamaichi in Hong Kong.
In Japan, banks and insurance issues got slammed.
Mitsubishi UFJ Financial Group plunged 5.32 percent,
Mizuho Financial Group was down more than 5 percent, and
Sumitomo Mitsui Financial Group plunged 6.11 percent.
Earlier in the day, the Bank of Japan kept interest rates
on hold, deciding to take a wait-and-see approach amid the
current volatility.
«With regard to risk factors, global financial markets
remain unstable and there are downside risks to the U.S.
and the world economy,» the central bank's policy board
said in a statement.
A higher yen dragged down major exporters such as auto
makers and electronics firms. A stronger Japanese currency
reduces the value of exporters' profits when repatriated
from abroad.
In Hong Kong, the blue-chip Hang Seng Index plunged almost
840 points to 21,174.77 _ its lowest close in nearly four
months.
China's biggest lender, ICBC, dove nearly 5.2 percent, and
HSBC lost more than 3 percent. Heavyweight China Life
Insurance slid 5.3 percent.
In mainland China, the benchmark Shanghai Composite Index
fell 3.4 percent to close at 2779.45.
The drop was sharpest for real estate developers, banks
and insurers. Among financial companies, China Life and
Ping An Insurance both tanked 6 percent. Midsize lender
Pudong Development Bank Ltd. dropped 7.1 percent.
The government is due to release closely watched inflation
data Thursday, which could add to pressure for an interest
rate hike. Analysts expect a decline from May's 7.7 percent
but expect the rate to stay above the government's 4.8
percent target for the year.
Elsewhere, South Korea's benchmark slid 3.2 percent,
India's Sensex was down 4.6 percent in late trade and
Australia's main index lost 2.1 percent.


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