By Rafael Nam
HONG KONG, March 17 (Reuters) - Asian stocks sank on Monday
to their lowest level since August 2007 and the dollar tumbled,
as the fire sale of ailing U.S. bank Bear Stearns and the
Federal Reserve's emergency cut in its discount rate
intensified concerns that there could be more victims of the
global credit crisis.
U.S. stock futures fell in Asian trade, pointing to a
sharply lower Wall Street open later in the day, as global
investors wonder if other financial institutions might need
rescuing. S&P 500 futures <SPc2> fell 30 points, while Dow
Jones industrial average futures <DJc2> dropped more than 200
points.
The fall in the dollar, which sank to a record low against
the euro, sent spot gold and crude futures hurling towards
record highs, deepening concerns of rising inflationary
pressures throughout the region.
Other safe-haven assets also rose. Japanese government bond
futures hit a three-year high and U.S. Treasury futures rose to
a five-year high.
"Desperate times need desperate measures. The Federal
Reserve is doing what it takes to restore stability and if it
means cutting the discount rate on a Sunday night in the U.S.,
then so be it," said Craig James, chief equities economist at
Commesec in Sydney.
The MSCI measure of Asian stocks outside Japan
<.MIAPJ0000PUS> dropped 3.8 percent as of 0316 GMT, after
earlier hitting its lowest since Aug. 20, 2007.
The index is now down about 20 percent for the year,
marking a sharp reversal from five previous years of
double-digit gains.
Financial firms across the region were hammered, including
Mitsubishi UFJ Financial Group <8306.T> and South Korea's
biggest lender Kookmin Bank <060000.KS>.
In an unexpected move before the markets opened in Asia,
the Federal Reserve lowered the discount rate it charges on
direct loans to banks and set up a a new programme to provide
cash to a wider range of financial firms, using tools it has
not used since the Great Depression.
At the same time, JPMorgan Chase & Co <JPM.N> said it would
buy Bear Stearns <BSC.N> for a rock-bottom price of $2 a share,
valuing the U.S. investment bank at the centre of a widening
global credit crisis at about $236 million.
The uncertainty has caused futures on the federal funds
rate to soar, with March futures contract <FEDWATCH> showing a
roughly 25 percent chase of 125 basis points of cuts at the
Fed's policy meeting on Tuesday.
PAINFUL 2008
Japan's Nikkei average <> dropped 3.2 percent hitting
earlier its lowest since August 2005, with exporters, such as
Toyota Motor Corp <7203.T>, sinking after the dollar hit a
13-year low against the yen.
Elsewhere in Asia, shares in Hong Kong <> fell 4.9
percent, South Korean stocks <> dropped over 3 percent,
while markets in Shanghai <>, Taiwan <>, and
Singapore <> were down more than 2 percent each.
Asian stocks are suffering from a painful 2008 as subprime
and credit-related writedowns in the global financial sector
are happening at a time when analysts fear the U.S. economy is
in or about to enter a recession.
The twin effects are having a knock-on effect from Bangkok
to Tokyo.
Local currencies are strengthening in line with the
slumping dollar, denting the growth outlook for the
export-dependent region by hitting returns from overseas and
making goods less competitive.
Meanwhile, surging food and energy prices are hitting the
pocketbooks of Asian consumers, leaving central banks in a bind
as they must deal with slowing economic growth but rising
inflation.
DOLLAR SINKS, GOLD SOARS
The dollar plunged 3 percent gainst the yen <JPY=> to hit a
13-year low below 96 yen and was on course to post its biggest
one-day drop since 1998. The U.S. currency was last trading at
95.77 yen, from near 99.00 in late New York trade on Friday.
The euro <EUR=> vaulted to a record $1.5905 <EUR=> against
the dollar, up 1.5 percent on the day.
"Market players are afraid that there will be a second and
third Bear Stearns out there," said Kosuke Hanao, head of forex
sales at HSBC in Tokyo.
The slumping dollar and the perceived safety quality sent
spot gold <XAU=> up more than 3 percent to a record $1,030.80.
Bullion later gave up some of the gains to trade at
$1,022.60/$1023.40, compared with late New York levels on
Friday of $996.90/997.70. Prices of bullion were last trading
at $1,020.09/1,021.70.
Oil jumped to its latest record on Monday as well, with
crude for April delivery <CLc1> up at 88 cents at $111.09 a
barrel, continuing a string of peaks hit since through late
last week.
Investors opted for other asset classes perceived to be
safer, with Japanese June bond futures jumping 0.98 point to
141.25, the highest since July 2005.
