Asia Stocks Sink Amid US Recession Fears

Monday January 21, 6:08 am ET
By Carl Freire, Associated Press Writer

Asian Markets Plunge Amid Pessimism Over US Stimulus Plan; Nikkei Sheds 3.9 Percent

TOKYO (AP) -- Asian stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

India's benchmark stock index was down a stunning 10.9 percent in afternoon trading, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Investors dumped shares because they were skeptical about an economic stimulus plan President George W. Bush announced Friday. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

Concern about the U.S. economy, a major export market for Asian companies, has sent Asian markets sliding in 2008.

"It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won't help the economy recover."

My Thoughts

STI fell 6.03%, worst decline ever seen since when I started investing last year.

The blue-chip Straits Times Index dived 187.10 points to 2,917.15, falling below the psychologically important 3,000-point level to a five-month low.

Would encouraging more consumer spending help to revive the economy?

I remembered clearly taking economics in my A levels class. GDP=C+I+G+(X-M). My teacher Mr Pillai(very good teacher) mentioned that C(consumption expenditure) constitutes a very large percentage of GDP in the US economy. Basically the US economy is stimulated by large consumer spending, so might Bush's policies work? Short term maybe, by generating more income for companies, but not long term. The policy might even increase more credit card debts and more write downs for banks! People might say "if can I default my mortgage payments, should I also stop paying my credit bills too?"

Solution?

The problem is a lot more complicated than we thought, so to find a solution is not that simple. Saving criticism for comments later, I would like to advise the Bush administration. They should hammer down hard on those who default mortgage payments. Make them sell their cars, houses and assets, anything that can exchange into cash. No house to live? Rent a room or build tent. Still can't pay? Extend their debt payments and impose laws to allocate a % of their income to pay back the debt. I feel that Bush is not focusing into the problem, which is the mortgage defaulters.

Asian Stock Markets Plunge

Wednesday January 16, 1:52 am ET
By Dikky Sinn, Associated Press Writer

Asian Markets Plunge on Worries That US Is Sliding Into Recession; Hang Seng Down 4 Percent HONG KONG (AP) -- Asian stock markets plunged Wednesday on growing speculation the U.S. economy -- a vital export market -- is sliding into a recession that could lead to a global slowdown.

Investors dumped stocks after an overnight sell-off in U.S. markets and on news that Citigroup Inc. had lost nearly $10 billion in the fourth quarter as it wrote down bad mortgage assets. Weak U.S. retail sales figures also added to the gloom, sending the Dow Jones industrial average down 277 points, or 2.2 percent.

"The moves on Wall Street signal fears that the U.S. is going into recession," said Rommel Macapagal, chairman of Westlink Global Equities in Manila, Philippines, where the market sank 2.7 percent.

Such concerns are becoming widespread in Asia, he said. "We're all looking for new support levels."

In Hong Kong, the benchmark Hang Seng index was down 4 percent at 24,815.61 in afternoon trading, while Tokyo's Nikkei 225 index fell 3.35 percent to close at 13,504.51 points.

Markets in Australia, China, South Korea and New Zeland also fell sharply on worries about slower growth in the U.S. and around the world.

The United States economy, battered by problems in the housing and credit markets, is a major export market for Asian companies, and weaker demand from American consumers will likely hurt profits at some of the region's companies. The U.S. Commerce Department said Tuesday that retail sales fell in December, and it revised the November figure lower.

Investors saw more fallout from the subprime mortgage market when Citigroup said Tuesday it had written down $18.1 billion for bad mortgage assets.

"The fallout from the Citigroup result is significant, with many saying ... there is more bad news to come," said Trent Muller, an ABN Amro Morgan analyst in Sydney, Australia. "We will see a bit of panic selling with a lot of investors taking cash off the table today."

There is also a growing fear that the Federal Reserve hasn't done enough to keep the U.S. economy going. The central bank has lowered its key interest rate by a full percentage point to 4.25 percent since early August.

Now many investors and analysts believe the Fed will cut rates by a half-point at its Jan. 29-30 meeting.

"The risks of a recession in the United States appear to have increased," said David Cohen, director of Asian forecasting at Action Economics in Singapore. "It's still clearly up in the air and that is reflected in the volatility that we see in the markets day-to-day. Every new headline can spook the market."

Japanese semiconductor stocks also fell after Intel Corp. shares plunged on concerns that the world's largest semiconductor maker is feeling the pinch of an ailing U.S. economy.

A surge in the yen, which hurts Japan's vital exporters, also depressed Tokyo stocks. The U.S. dollar fell to 106.02 yen, the lowest level in 2 1/2 years.

"The Tokyo market is very sensitive to the strong yen," said Tsuyoshi Nomaguchi, an analyst at Daiwa Securities Co. in Tokyo.

In China, the benchmark Shanghai Composite Index fell 2.6 percent to 5,302.64 by midday. China shares, which are mostly isolated from world trends due to regulatory controls, have gained about 1 percent since the beginning of the year, compared with losses in several other Asian markets.

But worries over the U.S. economic outlook and possible lending curbs by the central bank have hurt bank shares.

"The market is divided over the potential impact the U.S. subprime crisis may have on China's economy, and Hong Kong's weak performance gave some jittery investors the final push to sell," said Essence Securities analyst Zhu Haibin.

Associated Press Writer Hrvoje Hranjski in Manila, and AP Business Writers Yuri Kageyama in Tokyo, Elaine Kurtenbach in Shanghai and Thomas Hogue in Bangkok, Thailand, contributed to this report.

The FTSE ST Series Of Market Indices

Singapore Press Holdings (SPH), Singapore Exchange (SGX) and FTSE Group have jointly developed a new Straits Times Index (STI) as the Singapore stock market's main benchmark and created a family of new FTSE ST indices that will complement the STI.

The aim of the collaboration is to create a comprehensive suite of indices that will better reflect the performance of various sectors of the Singapore stock market and meet the needs of both retail and institutional investors. The revamped STI and the new FTSE ST Index Series will stimulate development of index-related products to serve diverse market needs. This in turn offers investors wider investment choices and opportunities in the Singapore market. With the availability of more indices, more listed companies can expect to be included in an index and achieve higher visibility with international fund managers and investors.

The new set of FTSE ST indices, which comprises the new STI and 18 new FTSE ST indices, were launched on 10 January 2008.

STRAITS TIMES INDEX (STI)

The STI now comprises 30 blue-chip companies on the SGX Mainboard ranked by market capitalisation as at 31 August 2007, which have passed the selection citeria outlined below. The constituents of the revamped STI can be found here

In line with FTSE's international methodology, these companies have been included based on the following criteria:

• Free Float. The free float of a listed company must be greater than 15%. The definition of "free float" includes portfolio investments, nominee holdings and holdings by investment companies.

• Liquidity. A stock must trade with a median daily turnover value of at least 0.05% of the value of its free float-adjusted shares in issue for at least 10 out of the last 12 months.

FTSE ST INDEX SERIES

The STI will be complemented by a new family of FTSE ST indices that will consist of 5 benchmark and 13 industry indices, including a new theme index to represent China stocks listed in Singapore. The new indices, by tracking the different sectors of the Singapore market, will help investors make better-informed investment decisions. The new indices will adopt FTSE's international methodology and will be based on the International Classification Benchmark (ICB), the globally renowned classification system created by Dow Jones Indices and FTSE. The use of the ICB will facilitate cross-border analysis and comparisons. The full list of indices can be found here To qualify for inclusion in any index, except the FTSE ST Fledgling Index, the market capitalisation of a listed company must fall within the top 98% by full market capitalisation of all SGX Mainboard companies. The FTSE ST Fledgling Index includes all the other qualifying companies comprising the last 2% by full market capitalisation. These stocks are not screened for stock liquidity. Constituents for the family of FTSE ST indices can be found here

GROUND RULES

The constituents of the STI and the new FTSE ST Index Series are reviewed semi-annually in accordance with a set of publicly available Ground Rules which can be found here

An advisory committee comprising of market practitioners, and/or representatives from SPH, SGX and FTSE undertakes the reviews. The first review is scheduled for September 2008.

Real time FTSE ST indices price.