Re: Asian Stocks Continue Global Plunge - LATimes(1-22-08)

"James Fenimore" <slipuvalad@yahoo.com> wrote in message

news:ea51acfd-bcf8-4b96-82f8-f51584b9db39@x69g2000hsx.googlegroups.com...

.... BUT BUSH Will NEVER Admit We're In RECESSION!

Jimmy displays his lack of comprehending the definititon of "recession"

At least not until January 21, 2009, the day after he leaves office!

You see, there IS NO WAY he'll admit a RECESSION -- like the 9/11

attacks -- happened on HIS WATCH!

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"Global Stocks Plunge as U.S. Crisis Spreads"

"Sell-Offs on All Major Exchanges"

By Ariana Eunjung Cha, Neil Irwin and Zachary A. Goldfarb

Washington Post Staff Writers

Tuesday, January 22, 2008; 7:01 AM

SHANGHAI, JAN. 22 -- Stocks across Asia took precipitous falls Tuesday

for the second day in a row, reflecting fears that a weak U.S. economy

could derail growth worldwide.

The drops were even more severe than those on Monday and several

markets hit multiyear lows. Indian shares plunged so quickly -- nearly

11 percent -- that its stock markets halted trading soon after

opening. In South Korea, volatile futures prices prompted the main

Kospi market to briefly suspend program selling orders at midday. The

Australian market suffered its worst one-day fall ever, while Japan's

Nikkei fell to its lowest since 2005.

Globally, the sell off has involved some of the worst market declines

since Sept. 11, 2001 and has erased more than $5 trillion from stock

markets this year.

U.S. equity markets were closed on Monday for the Martin Luther King

Jr. holiday. Stock futures pointed towards a drop of several hundred

points when Wall Street opens on Tuesday, extending a run of triple

digit losses that has sent the Dow Jones industrial average down ten

percent since the start of the year.

"This is an expression of panic -- really nothing less than panic

about prospects for the U.S. economy," said Stephen Green, senior

economist with Standard Chartered Bank.

For months, some economists had argued that Asian countries remained

largely insulated from the problems in the United States because of

strong growth in China and India. But recently, companies and

financial institutions in those countries have announced that they,

too, contain significant exposure to the subprime mortgage securities

that have collapsed in the United States.

Last week, the Bush Administration unveiled its proposed fiscal

stimulus package. The announcement was designed to instill confidence

in the economy, but investors responded by sending shares down to

their worst weekly performance since mid-2002.

"People are really scared about the depth and the potential side

effects of this recession from the U.S. The data is really bad," Green

said.

Not even one month into the new year, several of Asia's largest stock

markets are already off by double-digits. In Japan, the benchmark

Nikkei index dropped 5.65 percent Tuesday after already losing 3.86

percent Monday. It is now down nearly 18 percent this year. In Hong

Kong, the Hang Seng Index was down 8.65 percent Tuesday, after

dropping 5.49 percent on Monday. It's off 19 percent this year and 30

percent less than a peak in late October.

European markets were also down on Monday, but by Tuesday the mood had

moderated. London's FTSE 100, which lost 5.48 percent on Monday, had

risen a slight 0.35 percent by midday. Germany's DAX index, down 7.16

percent on Monday, was down a slight 0.62 percent at the middle of the

European trading day.

"Where the bottom is now is anyone's guess," said Wesley Fogel, a

market strategist for HSBC.

Officials at the Treasury Department, in the Federal Reserve system

and at major stock exchanges worked the phones yesterday -- calling

one another and their counterparts around the world. They were

preparing for what looks likely to be a volatile week on Wall Street:

Futures markets yesterday forecast a 4.5 percent drop in the Standard

& Poor's 500-stock index when exchanges open this morning.

A Treasury spokeswoman said only that the department is always

monitoring markets and in touch with participants. A spokeswoman for

the Fed declined to comment.

The markets fell as fears spread that massive losses on loans made to

U.S. home buyers would cascade through the world financial system.

Some of the firms that play important, but usually invisible, roles in

the global financial architecture are turning out to be exposed to the

downturn in the housing market in such a way that their ability to

function is threatened.

The companies that insure bond investors against defaults are having

to make massive payouts. One, ACA Financial, owes $60 billion that it

cannot afford to pay and has been taken over by the Maryland insurance

regulator. Its credit rating has been lowered.

The problems among bond insurers have meant that a wide variety of

financial institutions cannot count on receiving payments due them,

causing further losses.

Other news yesterday shows just how widely the damage has spread. A

Chinese newspaper reported that the Bank of China is exposed to

subprime U.S. mortgage loans to a degree it had not previously

disclosed and may have to write down the value of its $8 billion in

such investments. Several large European banks have taken similar

hits.

Those losses could have importance beyond the hit they cause to the

banks' share prices. Banks and other financial institutions play an

important role in an economic downturn: lending to businesses and

consumers so they can help the economy get back on track. The

multibillion-dollar losses could make them unable to play that role.

Moreover, foreign investors have been plowing capital into U.S. banks

to help them continue lending, which made the losses particularly

worrisome, some analysts said.

"Those infusions of capital have been crucial to maintaining

performance to date," said Joseph Mason, a finance professor at Drexel

University in Philadelphia. "If foreign investors should significantly

retreat from U.S. markets, that leaves us to our own recovery. In that

case, the current credit crunch will continue to bite and we maintain

a very high risk of recession."

Many economists have argued that continued growth in the rest of the

world -- especially in fast-growing markets like China -- will help

ease the pain of the slowdown in U.S. growth.

With their houses less valuable, U.S. consumers may start spending

less, goes this logic, while Asian and European consumers will do just

fine, preventing a global economic slump. Yesterday, analysts worried

that this theory won't hold up.

"People are scared, and they are reacting with behaviors which are

based on psychology," said David Kotok, investment chief of Cumberland

Advisors. "Some of that can be seen in the stock market, but they are

also changing consumer behaviors."

Many market analysts argued that stock markets in developing countries

have appeared to be overvalued for some time, which would suggest that

some of the market declines were necessary. For example, even after

yesterday's 5.1 percent drop, the Shanghai composite index in China

has risen more than fivefold in the past three years, sparking worries

of a bubble.

"Many of the markets, especially the European and Asian markets, have

been priced for eternal growth," said Axel Merk of the Merk Hard

Currency Fund.

European officials stressed the underlying strength of their

economies, arguing that they can continue to thrive despite weakness

in the American economy.

"It seems that the markets are considering the possibility of a more

pronounced slowdown, even a recession in the U.S.," European Union

Monetary Affairs Commissioner Joaqu¿n Almunia told reporters

yesterday. "I hope they will pay attention also to the real

information . . . because, at least in Europe, the economic

fundamentals of our economies are sound."

Most world markets were digesting for the first time the Bush

administration's proposal to try to stimulate the U.S. economy with

tax benefits. (It was announced Friday, after Asian and European

markets had already closed.)

Traders around the world seemed to have little faith that the plan

would arrest the slowdown in the U.S. economy, even if some version of

it is passed by Congress.

"Foreign markets are doubtful about the ability of Congress to move

quickly, and foreign markets have watched the Federal Reserve move

slowly in August, September, October and November," Kotok said. "So

the concern from abroad is that the U.S. has been too slow and done

too little and is now playing catch-up."

White House spokesman Tony Fratto said in a statement yesterday that,

while he wouldn't comment on daily market moves, "We're confident that

the global economy will continue to grow, and that the US economy will

return to stronger growth with the economic policies the President

called for."

Congressional leaders yesterday acknowledged how serious the European

and Asian sell-offs were and said they may have to rethink the size of

the stimulus and its content. Democrats still favor tilting the

package toward middle-class and poorer Americans, who would be the

quickest to spend any tax refunds or government checks. But

Republicans have been pushing for more incentives for investors and

business, a possible reaction to the stock-market jitters.

"I don't want to use the word 'panicky,' but you can't look at the

size of these [losses] and not be extremely nervous," said Rep. Rahm

Emanuel (D-Ill.), a former investment banker. Emanuel cautioned that

policymakers should not be chasing the markets, trying to reverse

losses already in the books.

Toyota and Honda were down more than 5 percent as the sharply rising

yen -- at a 2 1/2 -year high against the dollar -- increased fear of

slowing sales in the United States. "There is a sudden sentiment shift

to a worst-case, most pessimistic view," said Naoki Kamiyama, Japan

equity strategist at Morgan Stanley. "The market has lost faith in a

second-half recovery."

Irwin and Goldfarb reported from Washington.

(Staff writers Michael Abramowitz and Jonathan Weisman and Howard

Schneider in Washington, Blaine Harden in Tokyo, Molly Moore in Paris,

and Kevin Sullivan in London contributed to this report.)

http:/www.washingtonpost.com/wp-dyn/content/article/2008/01/22/

AR2008012200518.html