November 11 2008
Analysts said Paulson’s announcement discouraged investors
Asian markets have fallen sharply following the US treasury secretary’s announcement of a shift in the
bailout strategy for US banks.
Japan‘s main Nikkei index plunged more than five per cent in Thursday’s morning session while Hong Kong’s Hang Seng and South Korea’s Kospi were down more than six per cent each.
Share prices across most of the rest of Asia were also lower following Wall Street’s overnight fall of 4.73 per cent.
China stocks were up more than one per cent, however, despite news that the country’s industrial output growth had slowed to 8.2 per cent in October, compared with 11.4 per cent in September.
The announcement on Thursday came as Wen Jiabao, the premier, was quoted by state media as saying that the impact of the global financial woes on China’s economy was “worse than expected”.
In the US on Wednesday, Henry Paulson, the treasury secretary, said the government was scrapping plans to buy toxic mortgage securities in a refocus of its massive financial bailout plan, raising fears that the economy may be deteriorating rapidly.
Paulson said he wanted to stop buying up bank mortgage debts as part of the $700bn US government bailout plan and instead use some of the funds to secure ‘non-bank’ credit, such as credit cards.
The announcement drew criticism from Democrats, who called policy shift an abandonment of the bill negotiated between congress and the White House last month.
Motoki Ichikawa, the investment information chief at SMBC Friend Securities, said “the Paulson comment … came out of the blue, discouraging investors”.