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Asia stocks drop as Senate rejects US auto bailout
(Agencies)
Updated: 2008-12-12 15:08 BANGKOK, Thailand -- Asian markets plunged Friday as a US government rescue of Detroit's ailing automakers collapsed in the Senate and the perilous state of the world economy was underlined by more dire economic data and deep job cuts in the United States.
Japan's Nikkei 225 stock average was down 491.33 points, or 5.6 percent, to 8,229.22 and Hong Kong's Hang Seng index slid 6.9 percent to 14,537.21. South Korea's Kospi fell 4.5 percent while markets in Singapore, Australia and India fell between 2 percent and 4 percent. The dollar fell below 90 yen and oil also dropped below $46 a barrel. Investors were rattled after a $14 billion bailout for Detroit's struggling Big Three automakers failed on a procedural vote. The collapse came after bipartisan talks on the auto rescue broke down over Republican demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers. The bankruptcy of any of US automaker would deal another major blow to the American economy, already in recession, and ripple through export-dependent Asia, as well as global financial markets. "If a company such as General Motors filed for Chapter 11 bankruptcy protection it could strike the Dow below 8,000 again," said Jackson Wong, investment manager at Tanrich Securities in Hong Kong. "Even though China's government has been announcing plans to support the markets and the economy, Asia would follow Wall Street down," he said. Hopes for the US auto industry now appear to rest with President George W. Bush agreeing to tap the $700 billion Wall Street bailout fund for emergency aid. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain. Auto stocks in Asia plummeted on the news. In Tokyo, Toyota Motor Co. dived 10.6 percent and Honda Motor Co. slid 12.9 percent. South Korea's Hyundai Motor Co. shed 8.5 percent and Kia Motors Corp. was off 8.4 percent. There was also more grim jobs data from the US with new unemployment benefit applications reaching their highest level since November 1982 and Bank of America Corp. announced it expects to cut 30,000 to 35,000 jobs over the next three years. The Dow Jones industrial average Thursday fell 196.33 points, or 2.2 percent, to 8,565.09. Futures pointed to a sell-off Friday on Wall Street. Dow futures were down 286 points, or 3.3 percent, at 8,311 and S&P 500 futures slid 36 points, or 4.2 percent, to 838. The past week of gains in world markets was "more predicated on hope than reality," said Arjuna Mahendran, head of Asian investment strategy at HSBC Private Bank in Singapore. "This has been a typical bear market rally. It's been based on very high expectations of Obama's fiscal stimulus plan. It's been based one expectations and nothing else," he said. President-elect Barack Obama last weekend flagged a massive stimulus package for the US economy once he takes office in late January, pledging the largest public works program since the creation of the US interstate highway network a half-century ago. In currency trading, the dollar fell to 89.66 yen from 91.43 yen late Thursday in New York. Oil prices retreated after jumping the previous day. Light, sweet crude for January delivery fell $2.41 to $45.57 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. |
