Tuesday, March 18, 2008
Asian stocks tumble following news of Bear Stearns buyout
Monday, March 17, 2008 The Associated Press
Asian stocks plunged and the dollar sank Monday after JPMorgan Chase said it would buy troubled U.S. investment bank Bear Stearns, signalling to investors the depths of the credit crisis.
Oil prices hit a record in Asian trading and U.S. stock index futures were down sharply, suggesting Wall Street would open lower Monday after sinking Friday.
JPMorgan said Sunday it would acquire Bear Stearns for $236.2 million — or $2 a share — in a deal that represents a stunning collapse for one of the world's largest investment banks.
The buyout was aimed at averting a bankruptcy and a spreading crisis of confidence in the global financial system sparked by defaults in the U.S. subprime mortgage market.
But to Asian investors the move suggested the credit woes are far from over and fanned worries that other big American banks are facing serious troubles.
"There is persistent credit uncertainty. Market players have been repeatedly let down, which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.
"Just buying an investment bank does not solve the problem," he said. "Markets are prodding [the U.S. government] to inject public funds."
News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul. Both fell sharply before paring some losses in afternoon trading.
Japan's benchmark 225 index sank 3.7 per cent to close at 11,787.51 points, its lowest in more than 2½ years. In Seoul, the Korea Stock Price Index fell 1.6 per cent to 1,574.44 after sagging as much as 3.9 per cent.
Hong Kong's Hang Seng index was down 3.8 per cent at 21,377.45 after plunging as much as 5.4 per cent.
Across the Asia-Pacific region, all major stock indexes were down, including markets in Australia, China, Indonesia and the Philippines. India's Sensex dropped 3.8 per cent in morning trading.
"We are worried" about what comes next, Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of concerns that other banks may collapse.
Shim said investors were on guard ahead of the release of quarterly earnings reports from big U.S. investment banks this week, including Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley. Bear Stearns had been scheduled to report its results Monday, though it wasn't clear if it would go ahead with that plan.
Posted by Daniel Costello at 1:11 PM