naked capitalism

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.”