Asia markets slide on Dubai debt fears

2009/11/27

HONG KONG, Fri: Asian shares tumbled in early trade today, following global equity markets down on fears of a widespread default after Dubai issued a shock call to suspend the debt of a key state company. Hong Kong shares slumped 3.13 percent in the first few minutes of trade, while Tokyo was 1.81 percent lower at noon. Shanghai opened 1.05 percent down as investors also remained concerned that Beijing may tighten monetary policy.

The falls in Asia followed steep declines in Europe and the Middle East Thursday as investors’ appetite for risk evaporated, with US markets closed for the Thanksgiving holiday.

The government of Dubai rocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate for a debt moratorium of at least six months.

The Dubai request “fed a climate of insecurity and crisis of confidence at a time when fears are mounting about excessive public debt”, said Xavier de Villepion, an analyst with Global Equities in Paris.

The move hit banking shares as investors fretted over their exposure to a potential debt crisis. In Hong Kong, HSBC opened down 4.9 per cent at 89.50 Hong Kong dollars and Standard Chartered tumbled 5.9 per cent at 190.70.

The index recovered some ground later in the session with the benchmark Hang Seng down 541.23 points, or 2.44 per cent, to 21,669.18 shortly after 0300 GMT.

Earlier London’s FTSE index of leading shares closed 3.18 per cent lower after having been forced to suspend trading for three and a half hours due to a technical hitch.

Frankfurt’s DAX index fell 3.25 percent and in Paris the CAC closed 3.41 per cent lower, with major banks suffering all round. In Paris Societe Generale shed 5.48 percent to 45.62 euros.

Mixed news out of Japan also hit investor sentiment.

A bigger-than-expected fall in the jobless rate pointed at recovery in the world’s number two economy Friday, but the government fretted that the surging yen could again derail the export-reliant economy as shares fell 1.81 per cent.

Finance Minister Hirohisa Fujii did not signal imminent plans to intervene in currency markets but stressed that Tokyo was watching closely and could take steps for the first time in five years if the situation worsens.

Fujii was speaking as the dollar traded around 85 yen, its lowest level since the mid-1990s, raising fears that Japanese exporters such as Toyota, Honda and Sony will lose overseas competitiveness.

In stronger-than-usual comments, the minister said the yen’s rapid rise was
“harmful”, a day after Prime Minister Yukio Hatoyama said the government must take measures to avoid a double-dip recession.

Tokyo’s benchmark Nikkei-225 index dropped 169.73 points to 9,213.51 by the lunch break.

In Seoul shares were 2.56 per cent lower in intraday trade while Taipei was off 1.86 per cent at 0315 GMT.

Markets in Singapore, Kuala Lumpur and Indonesia were closed for public holidays. - AFP