Asia Hit Hard by Bear Sterns News

Investors shun risk, buying bonds and gold after news of Bear Stearns fire sale. ZHANG: Monday was a bleak day for Asian investors, with both stocks and the dollar tumbling on fears of a global credit squeeze. News that U.S. bank JPMorgan Chase will step in to buy the ailing Bear Stearns sparked fresh worries that more financial institutions were suffering big losses. JP Morgan will buy Bear Stearns, which was hit hard by bad subprime mortgage investments, at a value of $2 a share. A little over a year ago, in January 2007, Bear Stearns was trading at $170 per share. Late on Sunday, the U.S. Federal Reserve announced fresh emergency measures to stem a fast-spreading financial crisis, including another cut to the federal discount rate, and the decision to allow investment firms to borrow money from the Federal Reserve. Since its founding in 1913, the Fed has acted as a lender of last resort for ordinary banks, and will now be in effect doing the same for major Wall Street investment firms, for the time being. Neither piece of news was reassuring to Asian investors. Financials were among the worst performers, but stocks generally fell across the board with exporters, like Sony, also badly bruised. Japan's Nikkei ended 3.7 percent down (11,788), tapping a two-and-a-half year closing low. Markets also fell in Australia, South Korea, Taiwan, and especially in Hong Kong, where the Hang Seng lost more than five percent. The dollar was also a major casualty, at one point falling 3 percent against the yen. Gold, traditionally a safety play, shot up to fresh record highs above $1,030 an ounce. Some analysts now believe the United States is already in a recession and may be headed for a more severe downturn than seen in recent memory. If so, the impact is likely to be felt across Asia, where manufacturers produce a wide range of goods for American consumers.

YouTube | March 18, 2008