UpdateFears for Asia economy as crisis continues

07 October 2008 12:22  [Source: ICIS news]

(Adds analyst comments, closing levels for indexes and petrochemicals stocks)

 

SINGAPORE (ICIS news)--Asian stocks closed off lows but remained weak on Tuesday with fears the region’s economy could be badly damaged as global recession fears continued to rattle investor confidence.

 

“The damage to the economy is very real and we are just starting to see that,” said Kum Soek Ching, an analyst at Credit Suisse. 

 

“This is no longer about valuation but about how protracted this [possible] recession is going to be. We are now factoring in a deeper economic impact in Asia than before,” she said.

 

Regional indexes initially plunged in morning trade as the Dow Jones Industrial Average tumbled 3.6% to close at 9,955.50 on Monday.

 

At the close of trading, Japan’s Nikkei 225 shed 3.03%, or 317.19 points, at 10,155.90 after falling more than 5% in early trade.

 

Some indexes rebounded, with South Korea’s KOSPI Composite index rising a minimal 0.54% to close at 1,366.10, countering a 2% drop in morning trade, and Singapore’s Straits Times index gained 0.43% to close at 2,177.55 points.

 

Select petrochemicals managed a weak rebound following heavy losses in previous sessions. Japan’s Mitsui Chemicals gained 1.57%, Mitsubishi Chemical rose 2.83% and Asahi Kasei was up 4.45%.

 

Others remained depressed, with South Korea’s Hanwha falling 3.12% and SK Energy down 4.03% at the close.

 

The slight recovery might not signal a bottoming of the equities market, however, said Kum, adding it might be too optimistic to hope for that in the next three to four months.

 

As Europe had been going the way the US did in addressing problems in its financial sector through a series of bailouts, investors were left nervously wondering how everything would translate into the big economic picture, analysts said.

  

The EU was still struggling to come up with a unified approach to tackle its own financial turmoil head-on, while the US managed to pass its $700bn bailout package Friday last week, said Kum.

 

“That [bailout] helped us prevent a systemic meltdown. It would have been worse without it but people are focusing on how bad is the damage to the real economy,” she added.

 

By: Pearl Bantillo
+65 6780 4359

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