Wall Street’s Woes Ripple Around the World

LA Times writers Don Lee and Sebastian Rotella report on the American market crisis affecting China:

As U.S. officials engineered a bailout of insurance giant American International Group Inc. in New York on Tuesday, Lehman [Bros.] workers in London carted boxes from their offices and worried about joining the unemployment rolls. Bankers and accountants in Asia were tallying their exposure to American assets — South Korean financial firms had more than $700 million in investments each in securities linked to Merrill [Lynch] and Lehman.

We’re talking about a global economy that has been driven by extreme excesses created by the housing market in the U.S.,” said Kirby Daley, a strategist in Hong Kong for brokerage Newedge Group. “It was like a drug. But the drug is now gone, and there will be an adjustment.”

In Taiwan, “many banks and life insurance companies had investment in trust bonds of Lehman Bros., and they will be required to cut their investment in it and will suffer quite large losses,” said Kevin Yang, president of Taiwan’s Paradigm Asset Management Co. in Taipei.

Yang’s main worry, though, is Taiwan’s exports. Like much of Asia, Taiwan’s economy has been propelled by growth in China and the seemingly insatiable appetite of American consumers, whose inflated home values had led them to refinance their properties, extract cash and keep up their spending.

See also “In Asia, the Bloom Is Off the A.I.G. Rose” from the New York Times and in The International Herald Tribune’s “Rebound in Asian Markets After AIG Rescue Proves Weak”, Keith Bradsher reports:

Stock markets surged at the opening across much of Asia on Wednesday in response to the U.S. Federal Reserve’s rescue of the struggling insurer American International Group, but the rally began to lose steam by lunchtime on concerns about the U.S. financial system and the Chinese economy.

The CSI 300 index of shares traded in Shanghai and Shenzhen dropped 2 percent by midday as worries persisted about a real estate slowdown in mainland China. The Hang Seng index in Hong Kong was down 1.85 percent at midday after rising 1.7 percent in early trading. while in Singapore, the Strait Times index had dipped 0.5 percent and in Australia, the S&P/ASX 200 index fell 0.3 percent.

September 17, 2008 12:32 PM
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