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AP: Confidence in markets ‘more precious than gold’, says China
 
After a week of restless trading, Asian investors managed to ride out the shock waves that crashed through US and European stock exchanges last week.

But, as lawmakers moved to shore up confidence and nervous investors eyed the exits, concerns remained that the contentious $700 billion US bail-out package might not be enough to protect Asian markets from the gathering storm.

That gloomy mood was reflected in the markets’ response last Thursday to the US Senate’s approval of the bail-out plan. Tokyo’s Nikkei index, long a bellwether of Wall Street’s influence on Asia, fell 1.9 per cent in the day’s trading to finish at a three-year low.




Japan’s titanic car manufacturers, in particular, took a pounding after a new report showed car sales in the US nose-diving in September, falling below 1 million units a month for the first time since 1993 and highlighting the pervasive impact of the US crisis.

‘‘We are deeply concerned,” the country’s economic and fiscal policy minister Kaoru Yosano said of America’s economic woes. Newly-anointed prime minister Taro Aso pledged to ‘‘carefully respond to the situation to prevent such developments from spilling over [to the Japanese economy] greatly’’.

The Bank of Japan, which has been ploughing vast sums of money into propping up the markets for close to two weeks, injected another 1.6 trillion yen last Thursday.

It was a pattern repeated across the region, as markets in Taiwan, South Korea and Australia all receded in response to political developments in the US. In Seoul and Jakarta, regulators were forced to implement bans on short-selling to prevent a run on the markets.

Only Hong Kong bucked the negative trend, with the Hang Seng recording a 1.1 per cent rise in response to the Senate’s moves last Thursday, as the region’s chief executive spoke bullishly of Hong Kong’s ability to absorb crises.

‘‘Over the last ten years, we overcame the problem of the Asian financial crisis and economic problems led by the Sars epidemic,” said Hong Kong’s head of government, Donald Tsang. ‘‘We must remember that the economic fundamentals of Hong Kong are good, and our regulatory system, our fiscal economic system, are sound.”

As volatility gripped the rest of Asia’s markets, other leaders across the region were also issuing placatory assurances.

Speaking to reporters on Tuesday, India’s finance minister Palaniappan Chidambaram insisted that local investors had ‘‘nothing to worry about’’, while, in a speech last Wednesday, Taiwanese president Ma Ying-jeou insisted that ‘‘Taiwan’s economic fundamentals are still good’’.

‘‘We have the means to weather this global financial crisis,’’Ma said, just a day after his administration was forced to unveil an emergency plan to steady wildly-fluctuating markets.

Mainland Chinese markets, meanwhile, already reeling from a precipitous decline in share prices since the start of the year, were shielded from the confusion by a week-long public holiday which left the country’s trading houses closed. Nevertheless, China’s premier Wen Jiabao told the World Economic Forum’s ‘Summer Davos’ session in Tianjin that boosting sagging sentiment when the markets opened tomorrow would be a priority. ‘‘At this moment, confidence is even more precious than gold or any currencies,” he said.

But analysts are advising investors to proceed with caution - and they predict more pain for Asia’s export-heavy markets. ‘Asset prices are likely to tumble further, until the US risks stabilise,” said Citigroup analyst Yiping Huang. ‘‘Despite the fact that the US is the centre of the crisis, every time the crisis escalates, capital leaves emerging Asia.”
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