VELEZ-MALAGA, Spain -- Markets in Asia plunged while the Japanese yen surged to a high Monday, after the Federal Reserve cut interest rates by 25 basis points in a surprise move, and JPMorgan(JPM Quote - Cramer on JPM - Stock Picks) agreed to buy Bear Stearns(BSC Quote - Cramer on BSC - Stock Picks) for just $2 a share the day before. S&P Futures were plummeting 2.3% by the end of Asian trading.
In Hong Kong, the Hang Seng dropped 1152 points, or 5.2%, to 21,084, while China's Shanghai Composite Index dove 142 points, or 3.6%, to 3820. In Japan, the Nikkei lost 454 points, or 3.7%, to 11,787, representing its lowest close in two and a half years, as the yen rallied to 97.26 vs. the dollar by the end of trading.
"The Fed is pulling the strings, but it's not having much affect. The reality is that we can't keep bailing everyone out," says Justin Uquhart-Stewart, a director of global investor Seven Investment Management in London. "We're in the mud, and we're going to have to have some blood. Almost perversely, some bad news might be better news here, as investors wake up to what's going on while one or two banks go bust."
China Watch: Another Look-See at WuXi |
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Some traders in Hong Kong were labeling the bearish trading day "Bloody Monday," although most acknowledge a strong support-level in the Hang Seng at 21,000.
Signs that the U.S. credit crisis appears to be taking a toll on individual Asian economies are also appearing. "We're seeing weakness in selling prices in the Hong Kong property market, perhaps as a ripple effect from U.S. subprime," says Bryan Watkins, a trader at Daiwa Securities in Hong Kong.
Property shares in Hong Kong all closed lower.
Cheung Kong(CHEUY Quote - Cramer on CHEUY - Stock Picks) lost 5.7%, to HK$99.05, and conglomerate
Swire Pacific(SWRAY Quote - Cramer on SWRAY - Stock Picks) slid 5.2%, to HK$16.32.
Lower interest rates, and stellar earnings results in Hong Kong and China were brushed aside as equities were heavily sold off everywhere in Asia.
China Shenhua Energy(CUAEF Quote - Cramer on CUAEF - Stock Picks) reported an increase of 16.6% in net profit, while earnings of
CITIC Securities, China's largest listed broker by market value, soared 415% in the same period. CITIC said that it earned 12.4 billion yuan, or $1.75 billion, but that wasn't enough to ease fears as investors focused instead on the broker's announcement that it "won't guarantee buying into Bear Stearns."
China Shenhua tumbled 8.9%, to HK$32.95, while CITIC gained 0.9%, to 58.50 yuan in Shanghai.
Investors ignored mixed earnings forecasts for telcos too, and sold the sector heavily. Telecoms stocks are viewed as momentum plays in Hong Kong, as they tend to rise and fall in line with the overall direction of the Hang Seng.
China Mobile(CHL Quote - Cramer on CHL - Stock Picks) shed 4.6%, to HK$102.50, and
China Telecom(CHA Quote - Cramer on CHA - Stock Picks) dive-bombed a double-digit percentage, by 10.1%, to HK$4.72.
China Netcom(CN Quote - Cramer on CN - Stock Picks) lost 5.3%, to HK$20.55, and
China Unicom(CHU Quote - Cramer on CHU - Stock Picks) held up most, off 4.6%, to HK$16.32.
Among financials,
HSBC Holdings(HBC Quote - Cramer on HBC - Stock Picks) lost 3.9%, to HK$118.10, and insurers were hit hard on fears of a slowdown in consumption on the mainland.
China Life Insurance(LFC Quote - Cramer on LFC - Stock Picks) dipped 7.4%, to HK$25.70, and
Ping An(PIAIF Quote - Cramer on PIAIF - Stock Picks) dove 7.6%, to HK$53.20.
Bank of China(BACHF Quote - Cramer on BACHF - Stock Picks), which is China's most subprime-exposed bank, slumped 4.5%, to 2.96 yuan.
Daniel M. Harrison
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