& you're the one for me ;

Wednesday, August 01, 2007

Asian stocks sink as US home loan woes spread

[Posted: 01 August 2007 1655 hrs]

HONG KONG: Asian stocks tumbled on Wednesday as the fallout from growing problems in the US mortgage market snagged one of Australia's highest flying banks and stoked concerns over how much the debacle may ultimately cost.

Dealers said Wall Street losses overnight sparked by trouble at another US company on its exposure to higher risk mortgage loans set the region up for a bad day just as it was recovering from last week's mayhem.

The tone was set in Sydney, down 3.3 percent, where market favourite Macquarie Bank said two high-yielding funds faced losses of up to 300 million dollars (258 million US) because of the problems in US sub-prime home loans.

Shares in Macquarie Bank, known for its deal making and massive executive pay-checks, shed 10.7 percent as a result, enough to prompt Australian Treasurer Peter Costello to offer assurances that all was well.

"If you've got exposure in the US market then you'll be affected by US developments ... but I don't see any grounds to see the exposure of these funds in the US will impact on the parent in Australia. "We know that the parent in Australia is a well-capitalised, highly profitable bank," Costello said.

The issue, however, is that no one really knows yet the full extent of the problem and stock markets, above all else, hate such uncertainty, dealers said.

"I think to a certain extent, it's fear of the unknown," CMC Markets senior dealer James Foulsham said of the Australian market.

"People don't really know what sort of impact it's going to have. They don't think the full story has come out on this at the moment."

The problem dates to the US housing boom of 2005 and 2006 when the name of the game was to keep the loan flow going, as lenders spliced and diced the resulting mortgages into ever more exotic securities which were then sold into the global credit markets.

As US interest rates then rose, weaker borrowers defaulted, leaving their mortgages virtually worthless and so undermining the value of these instruments which were bought by investors, many of them institutions.

"Really, with the intricacies of how widespread this can be, investors are beginning to worry. If any more come out, this could steamroll the market, said CommSec equities analyst Donahue D'Souza in Sydney.

This was why the Macquarie Bank news seemed to have had such an impact, raising the spectre that many other financial groups may end up in the same boat, said Song Seng Wun, Head of Research at CIMB-GK Research in Singapore.

"We don't know (the impact on Asia) ... We can only watch and see," Song said, adding: "If the US economy continues to grow (the fallout) may be contained but if it falters, (the problems in US home loans) could worsen."

Significantly, Taiwan's Financial Supervisory Commission (FSC) said it was checking whether the US problems might have any fallout on the island's financial firms.

"We have asked our monetary affairs bureau to check with domestic banks ... We will keep an eye on their holdings in structured commodities and products relating to US mortgages," an official with the regulator said.

The Taiwan market lost 4.26 percent in heavy turnover as investors, especially foreigners, opted for safety first.

In Tokyo, which fell 2.19 percent, "stocks declined as investors are worried about a further pullback on Wall Street amid spreading worries about the US credit market," said Mitsushige Akino, chief fund manager at Ichiyoshi Management.

"As the economic fundamentals are solid here there are many investors who would like to buy on the dips but they are opting to wait as volatility in the US stock market has been quite high recently," he said.

Elsewhere in the region, Seoul lost 4.0 percent, Mumbai was down 3.08 percent in afternoon trade along with losses of 2.50 percent in Kuala Lumpur and 2.87 percent in Singapore.

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once again , regional indices were caught in yet another selling frenzy .

which really is to be expected .

the singapore bourse plunged by 115 points , faring even worse than how it did last friday when it shed 87 . same goes for the hang seng index which lost a massive 741 points . even the shanghai composite , which has till recently ignoring regional weakness by surging to one record high after another , lost over 3 per cent .

for the STI to lose 3,500 and 3,450 in a single day is unprecedented .

but still , a continued correction seems to be on the cards for the remainder of the week after a surprisingly strong start with respectable gains on monday and tuesday.

with euro-american indices falling badly in their opening periods today , regional indices will once again have to look at dow jones for directions tomorrow .

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okay .

now reporting on the events over the past two days .

mon .

was almost late for school .

thanks to this freak accident along ang mo kio avenue 5 .

the heading read "car collides with bicycle , cyclist thrown off 3m away" .

this delayed my travelling time by nearly 20 minutes .

man .

i was already late last wed for the first time ever in jc life .

as if that wasn't enough of a shame .

oh well .

nobody wanted this to happen either i suppose .

accidents aside , geog test was another disaster .

didn't have sufficient time to finish the second DRQ .

haiz .

had to stay back till 5+ for physics extra lesson .

and only four people from my class went .

well , i guess those who skipped made the right decision ?

(no . doesn't mean i advocate the practice of 'ponning')

of the 28 multiple choice qns from the prelim paper , almost half of them were outside the H1 syllabus .

and the lecturer as usual gave the answer key and that was it .

zzz .

that one hour could have been spent doing something more productive .

moving on to yesterday .

nothing unusual , besides from a relief teacher coming in for gp .

then had to do compre and essay .

essay would be for next week though .

compre has already been submitted today .

today also had to stay back for geog extra lecture .

didn't really absorb anything from it though . >.<

currently busy working on lithosphere revision worksheets .

so i shall end here for today .

those memories. 21:50