Asian Stocks, U.S. Futures, Dollar Tumble on Lehman Bankruptcy
By Chua Kong Ho and Shani Raja
Sept. 15 (Bloomberg) -- Asian stocks, U.S. futures and the dollar tumbled after Lehman Brothers Holdings Inc. prepared to file for bankruptcy, deepening a financial crisis that threatens to tip the global economy into a recession.
Macquarie Group Ltd., Australia's biggest investment bank, tumbled 7.6 percent while Shin Kong Financial Holding Co. fell 6.9 percent in Taipei on concern more banks will fail, adding to $514 billion of credit-related losses. The dollar declined against the yen while treasuries and gold rose as investors sought safer assets. The cost to protect corporate bonds from default surged.
Stock indexes declined by more than 1.5 percent in Australia, Singapore and Taiwan. Standard & Poor's 500 Index futures expiring in December retreated 2.5 percent to 1,227.60.
``It's mayhem,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets. ``If you thought the U.S. economy was slowing, that fear has been amplified, and that has implications for overall global economic activity.''
The MSCI World Index has slumped 19 percent this year as the worst U.S. housing recession since the Great Depression caused the subprime debt market to collapse, widening credit spreads and weighing on global economic growth.
The MSCI Asia Pacific excluding Japan Index lost 2.81, or 0.8 percent, to 351.22 at 12 p.m. in Sydney, with nine of the 10 industry groups declining. Stock markets in Japan, South Korea, Hong Kong and China are closed for holidays today.
Lehman, Merrill
Lehman and its lawyers are getting ready to file for bankruptcy protection, said a person with direct knowledge of Lehman's plans. Bank of America Corp. agreed to buy Merrill Lynch & Co. for about $44 billion, a person with knowledge of the deal said, after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week. That agreement came after Bank of America and Barclays Plc abandoned talks to buy Lehman.
``We need that final cathartic sell-off in the markets to say here's the bottom, it held, that's it, and this is the kind of event that could trigger it,'' said Peter Sorrentino, who helps manage $16.5 billion at Huntington Asset Management in Cincinnati.
Macquarie declined 7.6 percent to A$40.65. Babcock & Brown Ltd., an Australian infrastructure manager, tumbled 15 percent to A$1.62. Shin Kong Financial, the owner of Taiwan's third- largest life insurer, tumbled 6.9 percent to NT$14.80.
Carry Trades
The U.S. dollar fell 1.7 percent to 106.10 yen as investors reduced so-called carry trades, where funds are borrowed in a country with low interest rates and used to buy assets where returns are higher, earning the spread between the two.
``It will really be a battle between U.S. dollar weakness and carry-trade unwind, and add to that very thin liquidity with Tokyo and Hong Kong out,'' said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. ``The U.S. dollar is likely to continue to weaken.''
Treasuries surged, sending two-year notes up the most since January. The yield on two-year notes dropped 28 basis points, or 0.28 percentage point, to 1.93 percent as of 10:00 a.m. in Singapore, according to bond broker BGCantor Market Data.
``Trading started with a bang,'' said Andrew Brenner, co- head of structured products in New York at MF Global Ltd. in New York, the world's largest broker of exchange-traded futures and options contracts. ``Banks are no longer lending. All this is going to get people talking about a Fed ease.''
Newcrest Jumps
Newcrest Mining Ltd., Australia's largest gold producer, jumped 6.3 percent to A$20.72. Gold for immediate delivery rose as much as 2.6 percent to $785.70 an ounce today.
Centro Properties Group, the shopping mall owner facing a Sept. 30 deadline to repay some of its debt, plunged 18 percent to 8.6 Australian cents after a planned U.S. asset sale fell through.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan, including the Thai government and Hong Kong's Hutchison Whampoa Ltd., advanced 20 basis points to trade at 185, according to JPMorgan Chase & Co. data.
``The global credit crisis has permeated through all markets,'' said Jason Teh, who helps manage the equivalent of $5.7 billion at Investors Mutual Ltd. in Sydney. ``The real economy will feel the effects of this because it takes time for the banking system to restore itself.''
To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Last Updated: September 14, 2008 23:02 EDT |
