This Oct. 9 Business article about overseas stock markets misquoted Duncan Wooldridge, chief economist in Asia for UBS Securities. He said that private-sector debt, not household debt, amounts to 180 percent, not 183 percent, of South Korea's gross domestic product, and that this percentage is higher than the United States' private-sector debt figure.
Asian Markets Open With Early Gains As Anxieties Ease
Thursday, October 9, 2008
SEOUL, Oct. 9 -- Fear among Asian investors abated in early trading Thursday, as battered Japanese stocks, which had plunged nearly 10 percent on Wednesday, were up slightly and panic selling across the region gave way to tentative bargain hunting.
Central banks in South Korea, Taiwan and Hong Kong cut interest rates a day after a coordinated rate cut in the United States and Europe. China lowered its one-year rate on Wednesday night.
South Korea's currency has lost a third of its value against the dollar this year, prompting President Lee Myung-bak to warn Wednesday that currency speculators must stop "greedily pursuing private interests" when their nation is in trouble.
Markets in China and most of Asia were mixed or narrowly higher on Thursday. With blue-chip stocks in Japan at their lowest levels in years, some buyers returned to the market, focusing on steel and machinery companies. Nippon Steel, Japan's largest steel company, was up more than 6 percent, after falling 12 percent on Wednesday. Shares in Toyota Motor also rebounded, but not very much. They were up about 1 percent, after falling 11 percent the day before.
Fear and a worsening economic outlook pushed indexes from Mumbai to Saudi Arabia to London down sharply on Wednesday before central banks around the world orchestrated an interest-rate cut. European markets rebounded slightly later in the day before falling again.
Regulators in Indonesia and Russia halted trading after declines of more than 10 percent. Mumbai's Sensex index plunged nearly 6 percent when markets opened, then staged a partial recovery. Markets also fell in Persian Gulf countries, frustrating banking officials there who said economic indicators in the region remain solid.
In Japan, the Nikkei 225 fell 9.4 percent on Wednesday, the largest single-day loss since the Black Monday market crash in October 1987. It is now down more than 40 percent for the year. Markets in Hong Kong dropped more than 8 percent, and those in Singapore and South Korea were down 6 percent and 5 percent, respectively.
Insulated somewhat from the global financial crisis, with banks that hold large cash reserves, Japan has nevertheless been rattled by the sharp downturn in global car sales -- a critical component of its export-dependent economy.
Korean stocks joined in the decline, down 5.8 percent on the day and 32 percent this year. South Korean Finance Minister Kang Man-soo said in an interview that the government has sufficient reserves to support the won and that "we are ready and willing to manage the problem."
Unlike in 1997, when South Korea had to be bailed out by the International Monetary Fund, the country has more than enough foreign reserves, $240 billion, to cover its short-term debts of about $180 billion "We may suffer from temporary nervousness in the market," Kang said. "But we can manage the problem indefinitely. It is not a structural issue."
Local banks in South Korea, however, have become reluctant to lend money to small and medium-size companies. Standard & Poor's Ratings Services said this week that unless the government helps Korean banks solve their liquidity problems soon, it could lead to deterioration of their "fundamental creditworthiness."
Household debt in South Korea is exceptionally high by Asian standards. At 183 percent of the country's gross domestic product, it is higher than household debt in the United States, said Duncan Wooldridge, chief economist in Asia for UBS Securities.