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Another Bad Start to the Day in Asia (Update: Carnage!)

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Mr. Market is in a very bad mood. From Bloomberg:

Asian stocks fell, sending Hong Kong’s Hang Seng Index below 16,000 for the first time in two years, on concern the credit crisis will topple more banks and slowing growth will cut demand for the region’s exports…

“Investors are liquidating their stock positions because they are frightened of taking on any risks,” said Takashi Miyazaki, who helps oversee $61 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. “The jury is still out on how bad this is going to turn out for the global economy.”

The MSCI Asia Pacific Index fell 3.7 percent to 95.07 as of 11:39 a.m. in Tokyo, bringing its decline this year to 40 percent. The measure is set for its lowest close since April 19, 2005. Financial stocks contributed the most to the index’s drop.

The Hang Seng slumped 4.7 percent, leading declines in Asia, as Hong Kong’s monetary authority cut interest rates to keep a credit crisis from spreading in the region.

Japan’s Nikkei 225 Stock Average lost 4.5 percent to 9,696.12. Australia’s S&P/ASX 200 Index declined 3.4 percent, set for the lowest close since November 2005, as consumer confidence fell this month by the most in more than two years.

The key point came later in the article:

“The plans for propping up the markets aren’t having an effect,” said Yoo Byung Ok, who oversees the equivalent of $3 billion at Mirae Asset Investments Co. in Seoul. “The panic selling continues.”

As we have said before, investors understand that the markets are too big for governments to intervene on a scale necessary to keep asset prices at level not justified by fundamentals. Admittedly, some good investments may be unfairly punished in the carnage, but the bottom of the real estate market in the US is not in sight, and the impact of merely the current level of decline has exacted a high toll.

Update 3:00 AM. We are seeing the reverse of the pattern yesterday, when an awful opening in Asia was considerably tempered by the Australian Reserve Bank’s 100 basis point rate cut. Today, a bad start is only leading to further selling. The Nikkei is down over 9% right now. Other Asian markets are down a comparatively modest 5% ish. The fall in Japan was fueled in part by a report that corporate bankruptcies rose 34$ last moth. From Bloomberg:

Japan’s corporate bankruptcies jumped 34 percent last month, the fastest pace in eight years, as demand for exports slumped and credit-market turmoil engulfed the world’s second-largest economy.

Bankruptcies rose to 1,408 cases in September from the same month a year earlier, Tokyo Shoko Research Ltd. said in a report in Tokyo today. That’s the biggest jump since March 2000, when cases rose 38.6 percent, according to Bloomberg data.

Japan’s Nikkei 225 Stock Average tumbled 8.7 percent, its biggest rout since October 1987, on concern the global credit crisis will prolong the economy’s stagnation. Corporate failures are rising at the steepest rate since Japan’s banking crisis in 2000 as the credit shortage deprives businesses of cash.

“We’re in the middle of a recession,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Real-estate and construction companies have been in a mini- bubble over the last few years because of all that money coming from abroad. Now that’s withdrawn.”

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8 comments

  1. tyaresun

    The chinese markets were closed, aren’t they simply playing catch up? Of course that does not hold true for the Nikkei and the rest of the Asian markets.

    I am more curious to see if the European markets continue to fall.

    If the all the markets continue to fall I think we will see a coordinated action before the Asian markets open on Friday morning, perhaps a coordinated rate cut.

  2. Anonymous

    I think the rate cut is already discounted. Looks like pure panic at this point in time. Agree that the European markets will tell a lot of the tale but the central banks are starting to run out of bullets.

    Is the British solution the only viable option left on the table?

  3. Anonymous

    Nikkei down almost 9% at this point. These aren’t normal moves in mature markets. What an amazing time we’re experiencing.

  4. Anonymous

    “3 a.m., Yves? Sleep, rest, repeat.”

    yves is like my boss; both of them only need 4 hours of sleep a day.

  5. Anonymous

    The rumor that Toyota might report weaker-than-expected sales probably helped accelerate the Japanese markets to the downside. I don’t have any idea whether or not that rumor is true but… I just finshed listening to Corning’s (ticker: GLW)most recent conference call. In that call, Jim Flaws hinted that auto sales were not only significantly down in the US, but also worldwide.

  6. Richard Kline

    Someone want to tell me again how strong the yen is going to be with their zero bound policy rates, and toilet bound export economy?

    Ben B. playing with his rates is really and truly pathetic. For him to say at this juncture, as he did in Tuesday’s remarks, that we do not have a solvency problem in the US is delusional; he’s yesterday’s man indeed, and simply unwilling to see what he is looking at. Rate diddling is pointless, and the idea of using rates to ‘give a confidence boost’ to the markets is a confidence scheme all right. Some of the things the Fed has tried are, in fact clever, and they may yet wake up on the right side of the bed and get behind a Bitter Swedish Solution for the US. I don’t think Bernanke has that in him, and events will simply sweep by and past him if he doesn’t.

    Those are breath-take-away implosions in the Asian markets, even if they are more volatile. But equities _have_ to come down; it’s a bitter blow, but they’ve been pumped up like everything else. If we are going to get a _crash_ out of this collapse in equity prices in the US, it looks to be this week. If September was Black, what do we call October? Lightless? The Black Hole of Manhattan???

  7. bena gyerek

    richard, how about “oblivion october”?

    i’ve given up waiting for a sucker’s rally. i’m going to sell all my remaining shares today.

    market hasn’t even woken up to the coming meltdowns in china, consumer credit and corporate credit yet. fun times ahead..

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