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Asian stocks slip as US bailout questioned

Asian stocks slip as US bailout questioned
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First Published: Tue, Sep 23 2008. 09 21 AM IST
Updated: Tue, Sep 23 2008. 09 21 AM IST
Hong Kong: Asian stocks slid on Tuesday on skepticism about how Washington’s $700 billion bailout plan can restore confidence in the US financial system when the economy may be in a recession, boosting gold and government debt.
The US dollar stabilised after tumbling to a six-week low against the euro overnight as oil prices soared. Initial exuberance about Washington’s answer to the financial crisis, which is being fought over in Congress, faded and fears arose about rising costs exploding the US budget deficit.
Crude oil futures were down slightly below $109 a barrel, after rising nearly $5 overnight on the weaker dollar. Higher energy prices lent support to the skeptics about the cost of what will likely be the biggest US bailout ever.
The MSCI index of Asia-Pacific stocks outside of Japan slipped 1.5%, though it remained well above a two-year low hit on Thursday.
Australia’s benchmark S&P/ASX 200 index was down 1.9%, with bank stocks and shares of mining firm BHP Billiton the biggest drag.
The country’s regulator eased a total ban on short selling, allowing selected use of the strategy. However, investors wondered if such restrictions put into effect around the world would have much of a chance in stopping heavy selloffs.
Hong Kong’s Hang Seng index dropped 2% but it traded well above the two-year low hit on Thursday. Shares of China Mobile and HSBC were the heaviest weights on the index.
Japan’s market was closed on Tuesday because of a holiday.
Investors have sought refuge from soaring financial market volatility in gold. After jumping more than 3% on Monday, the precious metal was up 0.2% to $901.85 an ounce after earlier touching a seven-week high of $908.80.
Some signs show improved liquidity conditions in money markets, with the overnight US dollar borrowing rate stable around 2.25% and 3-month and 6-month US Treasury bill yields climbing above 1%.
However, many market participants remain shellshocked after the last two extraordinary weeks in which Fannie Mae and Freddie Mac were effectively nationalised, Lehman Brothers filed for bankruptcy, Washington bailed out insurer American International Group and Bank of America bought Merrill Lynch.
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First Published: Tue, Sep 23 2008. 09 21 AM IST
More Topics: Markets crisis | Global | Asian Stock | US | Bailout |