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Asia's economy remains uncertain amid U.S., Europe's financial jitters

08-10-2011 10:50 BJT

HONG KONG, Aug. 10 (Xinhua) -- The historic U.S. credit downgrade and lingering European debt crisis have ignited the Asian stocks rout, casting a shadow over the region's export- dependent economy that is vulnerable to uncertainties in the developed nations, market analysts said.

Standard and Poor's (S&P) downgraded on August 5 the U.S. credit rating from triple A to double A-plus, a move that fueled fears that the global recovery from the 2007-2009 financial crisis could be derailed and the world's economy is headed for a double- dip recession.


The knock-on effect of the U.S. credit downgrade, coupled with the exacerbating euro-zone sovereign debt crisis, sent global stock markets to dive. The Wall Street plunged Monday, with over 6 percent drop in both the S&P 500 and Nasdaq Index on Monday. The Dow lost 634.76 points, the biggest one-day decline since the fall of 2008.

Most stock markets in Europe also suffered significant losses despite a promising start. Germany's Dax has closed down 5.02 percent, while the CAC in Paris closed 4.7 percent lower. The London stock market slumped with the FTSE 100 index ending down 178.04 points, or 3.39 percent, to 5,068.95 points, its lowest closing since July 7, 2010.

As a knee-jerk results of the U.S. and European market slump, Asian stocks posted broadly losses Monday with the region's benchmark indexes, Tokyo's Nikkei index and Hong Kong's Hang Seng, down 2.18 percent and 2.17 percent,respectively.

South Korean financial markets fell into panic,as the benchmark Korea Composite Stock Price Index (KOSPI) dropped 3.82 percent to close at 1,869.45 Monday after losing as much as 7.4 percent, its worst daily percentage drop since late October 2008. The sharp declines in the KOSPI once prompted the Seoul bourse operator to temporarily suspend program trading on the main exchange Monday.

China's shares fell to one-year low on the same day, with the Shanghai Composite Index down 3.8 percent to end at 2,526.28, the largest one-day shrink since November.

Strategists in Tokyo said that global markets are on growing concerns about the mounting debt in the world's largest economy and ensuing political logjams proving insurmountable in the Congress.

Over the weekend, European leaders rallied to tame the debt crisis to fend off further market sell-off. The Group Seven (G7)'s claim Monday to react in a co-ordinated manner" to maintain financial stability failed to convince investors that they can keep the sovereign debt crisis under control.

However, brokers in Tokyo said that the pledges from the G7 did little to bolster investor confidence. "The three main concerns are S&P's downgrade of the U.S. debt rating, the ongoing European debt problems and inflation worries in China," said Masanaga Kono, chief strategist at Amundi Japan.

Pessimistic mood continued to hover on stock markets in Asia on Tuesday, as most key Asian stock exchanges extended recent losses and investors lost confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession.

Hong Kong stocks lost 5.66 percent to end at 19,330.70. Japan's Nikkei index dived more than 4 percent but trimmed losses to close down 1.68 percent Tuesday. South Korean shares ended 3.64 percent lower on Tuesday after diving more than 9 percent earlier. China' s Shanghai Composite Index closed down to a 12-month low of 2,526. 07 points.

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