Asian markets sink as investors react to U.S. news
SHANGHAI -- Asian financial markets sank today as investors reacted to news that the U.S. House of Representatives rejected a proposed $700 billion financial bailout package.
"I would say there's heavy despair," said Tim Condon, chief economist in Asia for ING Financial Group. "There was a great deal of hope attached to the passage of the bill, but Congress failed to pass it and you're seeing the results today."
Japan's Nikkei 225 was down 4.1% to 11,260, Hong Kong's Hang Seng Index fell 2.4% to 17,448 and Taiwan's Taiex index sank 3.6% to 5,719. Indexes in Australia and New Zealand also tumbled.
South Korean stocks dropped 0.6 percent. Stock exchanges in mainland China are closed this week for a national holiday.
Markets will only rally when investors are assured that the U.S. financial crisis is not spiralling out of control, Condon said. Investors are waiting for some sort of government intervention to address the credit crunch, he said, even if the package has some flaws.
"The U.S. is in really bad straits and needs to have a plan to stabilize the financial system," said Scott Lim, chief investment officer of MIDF Amanah Asset Management in Malaysia. "If they don't, you can see that there will be more financial fallout."
Leaders across Asia expressed concern that the bailout plan was voted down in Congress. Australian Prime Minister Kevin Rudd said in a radio interview today that his government was "urging all
American Congressmen, Republican and Democrat, to support a measure which is necessary to stabilize not just U.S. financial markets, but global financial markets."
Asian central bankers took additional measures to shield markets from the ongoing U.S. financial crisis. The central banks of Japan and Australia pumped $20.8 billion into the financial system to alleviate the credit shortage, and those in South Korea, Hong Kong and India said they were prepared to do the same if necessary.
In the past week, South Korea, Taiwan and Australia have all extended bans on short selling stocks to prevent speculators from betting that stocks will fall and benefiting when they do.
Japan's new prime minister, Taro Aso, encouraged the country's finance ministers to maintain order in Asia's largest economy.
"We have to respond appropriately in order not to affect the Japanese economy and to prevent the financial system from falling apart," Aso said, according to the Associated Press.
