Asian Markets Respond to US
By Anthony Wayne
Markets around the globe posted record losses last week but following a meeting of Eurozone leaders over the weekend Asian markets slowly climbed and as of Monday Asia Pacific index had gained 7.7% after dropping 20% last week; the worst performance in its history.
In Hong Kong the Hang Seng rose strongly in afternoon trading, and gained 10.2% in afternoon trading. Stock markets throughout Asia rose with the Singapore market gaining 6.6%, followed by Korea with a 3.8% gain. India’’s Sensex gained 7.7%, China posted gains of 4.12%. Japan’’s stock market was closed for a national holiday but Japanese traders remain optimistic.
Light trading in Asian markets indicates that Asian traders are waiting to see how the United States and European bailout plans will affect Wall Street. Over the weekend European central banks suggested they would follow the UK’’s lead by buying stakes in struggling banks and underwriting interbank loans. The US bailout plan is slowly taking effect and it is hoped that recapitalizing banks will unfreeze credit markets.
Despite coordinated rate cuts by the United States Federal Reserve and European central banks, businesses throughout the world are finding it difficult, if not impossible, to obtain short term loans necessary for day to day operations. To further complicate things, money market rates remain abnormally high. Banks remain unwilling to lend in the current economic atmosphere.
The failure of Lehman Brothers has been felt globally and Asia is no exception. Many small businesses invested in “mini bonds,” complicated structured financial products, which were marketed by Lehman Brothers throughout the world. In Hong Kong many banks sold the mini bonds as a low risk alternative to fixed income investments. With the mid September collapse of Lehman Brothers the mini bonds lost most of their value and companies that invested in them now find themselves unable to cover the difference.
Although the rally in Asian markets is cautious, it would appear that markets are starting to respond to actions taken by governments. On Friday the International Monetary Fund met in Washington and leaders of the Eurozone met over the weekend and announced strategies to stabilize markets. In Forex markets the US dollar is holding steady and the Euro made slight gains. The US dollar has been trading steady despite the economic crisis in the US much to the amazement of many currency traders. With global stimulus plans beginning to take effect Forex markets should provide some interesting opportunities over the next few months. While the Forex market can sometimes be volatile, compared to stock markets it is looking better every day.
About The Author
Anthony Wayne works in the marketing department of the Forex Opportunity site http://www.forexopportunity.net in Pennsylvania. He is also editor of the Forex Network Site http://www.thefxnetwork.com, a network of Forex information and news sites.