Markets slide as US property fears spread

Singapore stocks shed 116 points in face of troubling news from US credit markets

(SINGAPORE) Stock markets around the world plunged yesterday following sharp losses in US equities on Tuesday, as the problems which began in the subprime mortgage market there continued to infect other parts of the financial markets.

The Straits Times Index fell 115.95 points or 3.3 per cent to end at 3,431.71, the lowest since May2.

In Australia, shares declined by more than 3 per cent, as reports said that two funds managed by Macquarie Bank, Australia's largest securities firm, were facing losses of up to A$300 million due to US subprime mortgage exposure.

Meanwhile, US investment bank Bear Stearns stopped investors from withdrawing money from another of its funds. Two of its other funds nearly collapsed in June after suffering massive losses linked to subprime mortgages.

Fears that the problems have now spread to the wider markets fuelled the bout of selling yesterday.

There's currently a flight to safety caused by more troubling news in the US credit markets,' said economist David Cohen at Action Economics.

Rising defaults and delays on payments by homeowners in the United States have led to losses by hedge funds and banks investing in securities backed by these payments.

This has in turn driven up borrowing costs for companies and buyout funds, as creditors tighten conditions for lending and investors shy away from new debt issues.

Low-cost debt has played a large part in financing private equity buyouts of public-listed firms in recent months. Speculation surrounding the deals and other potential targets has in turn driven up share prices in major markets.

Fears about how wide the subprime contagion has spread is now unsettling investors worldwide.

'No one knows where the ultimate subprime risk resides so investors across the globe are ducking for cover,' Simon Carter, head of North American equities at Aegon Asset Management in Edinburgh, told Bloomberg. Some of them hit the panic button yesterday.

In Japan, the Nikkei-225 index fell 2.2 per cent, while Hong Kong's Hang Seng Index fell 3.2 per cent. China's indices in Shanghai and Shenzhen both lost 3.8 per cent, while South Korea's Kospi index dived 4 per cent.

In South-east Asia, the Kuala Lumpur Composite Index ended 2.5 per cent lower, while key indices in Thailand, Indonesia and the Philippines also lost more than 2 per cent.

In Europe too, shares got off to a weak start, with London's FTSE-100 index trading 1.5 per cent lower at noon in the UK.

Mr Cohen said Asian investors would now be looking to see if the turmoil in the financial markets would dampen consumer confidence in the US, which would in turn affect demand for Asian exports. 'That's clearly the biggest concern right now.'

But economic fundamentals around the region and the world have been 'very solid', he added.

Kevin Scully, managing director of NetResearch Asia, said he expects to see more selling in the stock market here in the next few days, forced by margin calls. 'I think it's a good correction back to fundamentals.'

Jimmy Koh, United Overseas Bank's head of economics and treasury research, said financial markets were adjusting for a global repricing of credit risk.

'This is an issue of confidence. Once the dust settles, it's important to note that the fundamentals have not been eroded.'

The current sell-off would create a 'cleaner, more robust' financial system, he said.

Comments

Post a Comment

Popular posts from this blog

US Quake Test Goes “Horribly Wrong”, Leaves 500,000 Dead In Haiti

By: Sorcha Faal, and as reported to her Western Subscribers A grim report prepared by the Russian Northern Fleet for Prime Minister Putin is stating today that the catastrophic earthquake that has devastated the Island of Haiti was the ‘clear result’ of a United States Navy test of one of its ‘earthquake weapons’ planned to be used by the Americans upon the Persian Nation of Iran but had gone ‘horribly wrong’. The Northern Fleet has been monitoring US Naval movements and activities in the Caribbean since 2008 when the Americans announced their intention to re-establish their Forth Fleet that had been disbanded in 1950, and which was responded to by the Motherland when later that year a Russian flotilla led by nuclear powered cruiser Peter the Great began their first exercises in this region since the ending of the Cold War. Though virtually unknown to the American people, the use, and perfection, of earthquake weapon technology has a decade’s long history that began with the former Sov
Read more

I'm an accountant, I hate my job, but seriously, I wouldn’t know what else to do

I was born to be a lot of things, but being an accountant isn't one of them. In my heart of hearts I have always known this, but for some stupid subconscious reason, I have always ignored it. Why? Well...um...err...I didn’t know what else to do. How many people faced with the same predicament of deciding on a profession upon graduating used “not really knowing what to do” as their guiding compass? Blink. Ten years have passed and you’re left wondering, how did I get here? In this cubicle? Doing something I cannot stand (and I’m not even honestly good at), with people I quite frankly don’t really care about? For me that was accounting, a profession that conjures numerous clichés, such as boring, bean counting, personality not needed, number crunching etc etc. These have now evolved and have been replaced by repetition, reconciliations, long hours, fudging figures, high turnover, Enron and even more reconciliations. R-E-S-P-E-C-T But please don’t get me wrong, I have the utmost respe
Read more

Have We Reached a Top?

By James Kostohryz It's never been my position that the flow of fundamental news would turn from positive to negative overnight and in a total fashion. The world simply doesn't work that way. When I terminated my core long position a couple of weeks ago for reasons explained in�Ten Reasons the Countertrend Rally May Be Over,�I outlined a series of factors I believe may manifest in the later half of 2009 and the first half of 2010. Indeed, most of these factors will be more back-end loaded, as negative factors tend to build on one another and gain momentum in time through the medium of psychology and social mood. It's my view that the flow of economically relevant events�-- and perceptions of these events --are in the early stages of a transition. In this case, a transition means the flow of relatively good news will tend to wane somewhat while there's an uptick in relatively bad news. This is what one would expect at a top. However, it's to be expected that during t
Read more