Asia Times Online


	September 13, 2001	atimes.com

Front

ASIAN MARKETS: Disaster

The region closed lower following the devastating terrorist attacks in New York and Washington. Some markets decided to close. Others might have wished they had as they recorded some of the worst one-day index falls in recent memory. Asia copied shocked investors in Europe, where London plunged by nearly 6 percent, or 287.7 points, to 4746.0, Paris tumbled 7.4 percent to 4059.75 and Germany dived nearly 9 percent to 4273.53. Airlines, insurers and exporters felt the worst effects as investors rushed to the perceived safe havens of oil and gold.

Following the attacks, the secretary general of the Organization of Petroleum Exporting Countries (OPEC), Ali Rodriguez, said that the oil exporting cartel is committed to ensuring stable oil supplies and prices. "The tragedy does not change OPEC's decision to guarantee the stability of the oil market," he said. He also requested that Washington refrain from carrying out retaliatory measures. Experts said that though OPEC's commitment should prevent steep price rises, the future of crude prices will be determined in large part by what type of action the US takes. They said that though the New York Mercantile Exchange should resume operations in one or two days, fluctuations in crude prices are expected, and will not subside until the US decides how to react, especially if Washington moves to punish a country in the Middle East.

Australia
The Australian Stock Exchange defended its decision to open for trade, saying that it did not take the decision lightly. "We consulted other exchanges in the region and we opened before them all, except for New Zealand," an ASX spokesman said. "We spoke to brokers, financial institutions and fund managers and we received overwhelming support to open."

However, he added that the consensus was not unanimous. "We received extremely strong support from brokers at Merrill Lynch and JP Morgan, and not that anyone opposed it, but a few questioned the move," the spokesman said. "Across the board we contacted listed companies, some who had quite directly and sadly been affected by the events ... insurance companies, Westfield, airlines."

From its usual opening time, the only change for the Australian market was that the ASX increased the staggered alphabetic rollout of companies as they began trading. "That was deliberate ... in the interest of transparency and orderliness as the opening is crucial, we decided to just tweak it," the spokesman said.

Still, the exchange sunk to a 14-month low and despite the staggering, investors soon drove the benchmark S&P/ASX200 Index to its largest percentage loss since the tech-wreck storm swept markets in April last year. The S&P/ASX 200 Index plunged a massive 133.5 points, or 4.1 percent, to close at 3,108.5 points, while the All Ordinaries plunged 131.9 points to 3051.3 points. The All Industrials Index, weighed by a slump in News Corp, fell 241.2 points to 5,250.7 points, and the All Resources Index slipped 36.6 points to 1,367.8 points. On the Sydney Futures Exchange, the September Share Price Index was 115 points lower at 3,134, a 25.5 point premium to the S&P/ASX 200 Index, on volume of 15,608 contracts.

Almost A$2 billion (US$1.03 billion) was wiped from the market value of Australia's three major listed insurance companies in the fallout from the attacks. Shares in AMP Ltd, NRMA Insurance Group Ltd (NIGL) and QBE Insurance Group Ltd each plunged by about 7 percent. Some market watchers estimated global insurance groups will have to pick up a tab worth up to US$40 billion. While Australia's insurers were not believed to have big exposures to the disaster, they were concerned about the impact the attacks would have on their investments in equity markets.

AMP was hit hard, its shares fell by A$1.281 to A$17.819, a 10-month low, wiping A$1.43 billion off its market capitalization. The financial services giant warned that if equity markets, particularly the UK, fail to recover before the end of 2001, returns from its equity investments will fall. "A long-term downturn in world markets would reduce the operating revenues of our global asset manager Henderson Global Investors and indirectly, to a lesser extent, our financial services businesses," AMP said.

QBE chief executive Frank O'Halloran said that the insurance giant, which reaped most of its earnings from overseas, will have exposures through a number of portfolios to the terrorist attacks. However, the exposures were "substantially protected" by way of reinsurance. Investors still hammered the stock, with the shares diving by more than 12 percent at one stage, before they recovered slightly to close 76.4 Australian cents lower at A$9.45.

Australia's biggest general insurer NIGL said that it does not expect the fallout from the attacks on the World Trade Center and Pentagon to have a material impact on its earnings results. Acting chief executive Ian Brown said, however, that the A$3.1 billion NIGL had invested in equities as at June 30 could suffer as a result of equity markets weakening in the aftermath of the attacks. NIGL shares lost 23 cents to A$3.10.

SunCorp Metway shares fell 47 cents to A$12.15, despite saying that it has no insurance exposure to the events in the United States, and AXA Asia Pacific slid 14 cents to A$2.60.

Analysts said that some of the selling of insurance stocks was overdone because of investors panicking about the terrorist attacks. "The insurance companies are in reasonable shape," said one analyst, who asked not be named. "But its going to take some time for sanity to come back into the market."

Investors dumped Qantas Airways Ltd shares as security fears gripped airlines across the globe. The wave of attacks involved four passenger aircraft, two of which were operated by American Airlines, which is one of Qantas' alliance partners worldwide. By late morning Qantas shares were 32 cents lower at A$3.12, after at one stage falling to a low of A$2.95.

Property company Westfield Holdings Ltd has said that the destruction of New York's World Trade Center, for which it held a retail lease, was not expected to have a major impact on the group. Westfield shares, which were placed in a trading halt ahead of its statement, were down 8.52 percent, or A$1.50, to A$16.10 by late morning.

The price of gold bullion in Sydney jumped 4.22 percent in morning trading, soaring US$11.75 an ounce to be trading at US$290 an ounce. The Gold Index on the Australian Stock Exchange increased 2.14 percent, with all major stocks posting significant gains. The Gold Index was 15.3 points firmer at 858.1, after earlier hitting an intraday high of 866.1. Among Australia's leading gold stocks, Newcrest Mining Ltd was eight cents up at A$4.48, Normandy Mining Ltd was steady at A$1.35, Delta Gold Ltd was eight cents higher at A$1.66, Goldfields Ltd was three cents firmer at A$1.95 while Lihir Gold had gained six cents to be trading 98 cents.

Auzeq Securities resources analyst David Walker said that gold is exhibiting its traditional characteristics as a safe haven following events in the US. "There has been a lot of talk in recent years that gold has failed to hold that position ... but a situation the magnitude as this, gold has coming out again as a store of value. The US dollar has weakened, there is great uncertainty in the equities markets, there has been a flight to quality in fixed interest, there has been talk of significant further rate cuts almost immediately in the United States to counter any negative impact on the US economy. In those sort of situation you would expect gold to respond and it has."

ANZ Investments suspended all managed fund trading due to the closure of various international markets. ANZ said the move has been made to protect the interests of ANZ Investments investors and is in line with steps taken by other investment managers. It said due to the nature of their investments, ANZs V2 PLUS, Cash Plus, Mortgage Fund and Superannuation Savings Account will continue to operate as normal. ANZ Investments will continue to monitor the impact on global markets and managed fund trading will re-commence as soon as it is satisfied that markets are trading normally.

Mineral explorer Sally Malay Mining Ltd postponed its listing on the Australian Stock Exchange in the wake of the attacks. "Given the uncertainty that this created we had an opportunity to delay and at this stage we will list on Friday," the company said. And Australian thermal coal group Enex Resources Ltd is likely to delay its A$2.5 billion initial public offering.

China
While markets around the world plunged, China's bourses were extremely strong, led by oil shares. China's two bourses, the Shanghai and Shenzhen stock exchanges, opened lower. The Shanghai Composite Index opened at 1822.10 points, down 41.68 points or 2 percent from the last close of 1,863.78 points. The Shenzhen Component Index opened at 3,711.70 points, down 49.39 points or 1.3 percent from the last close. In just a few minutes after the opening, however, the shareprices recovered quickly to the normal level in previous days, led by oil stocks.

There was heavy buying in comparison to previous days, with the daily turnover increasing some 30 percent over the average of the past several days. The Shanghai Composite Index closed the day at 1852.6 points, down from Tuesday's close of 1863.8 points, on a turnover of 10.5 billion yuan. It was above the five-day and 10-day averages, which stood at 1848.7 and 1846.5 points, respectively.

Hong Kong
Hong Kong prices plunged 8.9 percent to close below the 10,000 point level for the first time in over two years. The key Hang Seng Index lost 923.74 points to close at 9,493.62. The Hang Seng September Contract last traded at 9,340 points. The Hang Seng China Enterprises Index was down 41.30 points at 372.03, while the CAC Index was down 118.93 points at 756.76. TraHK was down HK$1.10 at 9.50. The GEM Index was down 17.38 points at 172.15 on turnover of HK$57.45 million.

For Hong Kong, the US is its biggest export market apart from China, and shares with direct exposure to the US were bashed on fears of a prolonged US downturn. They included Cathay Pacific Airways, down 16.77 percent at HK$6.95; banking giant HSBC Holdings, off 7.71 percent at HK$80.75; and micro motor maker Johnson Electric Holdings down 14.38 percent to HK$6.85.

Selling pressure was evenly distributed across the board. In the telecom sector, China Unicom was down HK$1.05 at HK$8.05 after the release of its interim results, while China Mobile dropped HK$2.45 to HK$19.00, Hutchison was down HK$8.25 at HK$54.25 and PCCW eased HK$0.23 to HK$1.72. HSBC dropped HK$8.50 to HK$79.00, Hang Seng Bank was 4.25 lower at HK$78.25 and Bank of East Asia lost HK$1.10 at HK$16.45. Cheung Kong lost HK$7.25 to HK$58.00, Sun Hung Kai Properties fell HK$6.00 to HK$54.25, and New World Development was down HK$1.0 to HK$6.05. CNOOC fell HK$0.35 to HK$7.45, and PetroChina shed HK$0.04 to HK$1.53.

Japan
Before the start of trading, Japanese Financial Services Agency (FSA) Minister Hakuo Yanagisawa urged financial market participants to act calmly, but to no avail. Stocks prices in Tokyo fell 6.6 percent to crash through the 10,000 point level as investors fled. The Nikkei-225 index on the Tokyo Stock Exchange plunged 682.85 points to end at 9,610.10, falling below the psychologically important 10,000 mark for the first time in over 17 years.

Japanese Prime Minister Junichiro Koizumi has offered to do "anything we can do on our part" to assist the US. His government has increased security around US bases in Japan, including the Misawa airbase. Around 20 Japanese companies, mainly banks and brokerages, had offices in the World Trade Center.

Investors at home and abroad rushed to unload shares soon after the Tokyo Stock Exchange opened. Apart from oil-related and some other issues, most stocks fell their daily limits soon after opening. The massive amount of bad loans in Japan's banking system as well as weak earnings at information technology-related firms also fueled selling.

The nation's major bourses in Tokyo, Osaka, Nagoya and other cities began trading 30 minutes later than usual to avoid confusion over the attacks.

Foreign investors of stock investment trusts and pension funds are rushing to unload Japanese and European shares, because US share prices are expected to fall when stock markets reopen. Shares of international blue-chips, including Sony Corp, Matsushita Electric Industrial Co and Toyota Motor Corp, were prominent selling targets.

Tokyo's losses included falls in blue-chip exporters such as Toyota Motor Corp and chip maker NEC Corp, both posting daily limit losses. High-tech bellwether Sony Corp ended the day down 5.02 percent at 4,730 yen, while NEC lost 8 percent to 1,150 yen, and Toyota lost 6.85 percent to 3,400 yen. All were hit by fears of slowing exports to the United States, Japan's biggest trading partner.

The Tokyo Stock Exchange halved its price limits for Wednesday and Thursday to help buffer the market from wilder swings. The limit covers all stock issues, including beneficiary securities on investment trusts and investment securities, and convertible and exchangeable bonds. This is the first time Japanese stock markets have imposed such restrictions since the so-called Nixon Shock in 1971, when the US temporarily suspended the conversion of dollars into gold. The emergency step does not apply to futures or option trades, nor to the Jasdaq over-the-counter market.

Prices of gold, crude oil and other international commodities went through the roof, as investors followed the lead of London and other overseas markets where prices jumped in response to the attacks. Gold and crude both went limit-up on the Tokyo Commodity Exchange, with all gold futures contracts starting the day at their maximum allowable gain. Some profit-taking emerged thereafter, but August 2002 contracts were up 3 percent compared with the previous day.

Cash flooded into the market as investors scrambled for a place to stick their money with the overnight New York market closed for the day. Gold jumped with a vigor not seen even during the insecure days of the 1990-1991 Gulf War crisis or the Russian economic crisis in the late 1990s. Investors were increasingly keen to buy the metal itself amid growing uncertainty over the global economy. "Inquiries from individual investors are soaring," said a source at one major gold trader in Tokyo.

Dubai crude skyrocketed in the morning on the Tokyo spot market. The benchmark contract for October delivery jumped 1.25 dollars to 26.15 dollars, the highest in three months. The overnight jump by North Sea Brent future contracts in response to the attacks helped to spur Dubai crude. Crude futures were listed for the first time on the Tokyo exchange on Monday. Buy orders swamped the market just after the opening, with all crude contract months going limit-up during the morning session. The February contract jumped 3.9 per cent from the previous day. Gasoline and kerosene futures also went limit-up.

The Philippines
Philippine share prices dived 4.1 percent to their lowest level in almost three years following the attacks. The Philippine Stock Exchange Composite Index fell 52.7 points to 1,241.39. It was the lowest close for the index since October 7, 1998, when the index closed at 1,212.75. Decliners outnumbered advancers 73-9, with 18 unchanged.

Banking and financial services shed P7.31 to P518.72, while mining rose P90. 51 to P1,228.81. Oil was down P0.03 at P1.44. Portfolio favorites like Meralco B, PLDT, SM Prime, Ayala Land and Ayala Corp were hit by brisk selling. Meralco B fell P2.50 or 5.49 percent to P43, on turnover of 2.520 million shares. Meralco A shed P0.50 to P30.50 on 169,900 shares. PLDT fell P47.50 or 8.72 percent to P497.50. Ayala Corp shed P0.30 to P6.10 on 3.688 million shares, while Ayala Land lost P0.20 to P4.70 on 11.249 million shares. SM Prime closed down P0.60 at P6.00, on volume of 11.224 million shares.

Insurers were under pressure on speculation over their possible exposure. Sun Life Financial Services of Canada dropped P12 percent or 135 percent to P990, on 4,670 shares. Manulife Financial lost P180 or 12.59 percent to P1,250, on 2,470 shares. BPI fell P1.50 to P59, while PNB was flat at P53 after hitting a day-low of P50.

South Korea
Shares on the Korea Stock Exchange (KSE) reported record-breaking losses. The Korea Composite Stock Price Index (Kospi) was trading under the 500-point level at 490.14 as of noon, and ended the day at 475.60, a collapse of 64.97 points or 12.01 percent, compared to Tuesday's close of 540.57. Korean shares retreated 11.63 percent last April after a crash on Wall Street, marking the greatest drop at that time.

The nose-diving stock prices forced KSE authorities to activate its circuit breaker mechanisms two minutes after the market opened, halting trading for 30 minutes. Circuit breakers are called for if the Kospi falls by more than 10 percent and continues on a downward path for more than one minute.

Dealers said that a sense of panic pervaded the market as investors shed their holdings en masse. Institutional investors tried to stem the selling spree by buying up 313.4 billion won worth of stocks more than they sold, but failed to stop the downward momentum, triggered by a sizeable net selling position taken by foreign and private investors. Across the board losses were reported with decliners dwarfing gainers 844-15, and two companies remaining static. Market officials also said that 621 companies fell to their daily limit lows.

Securities, transportation and storage, machinery, precision medical equipment shares fell by over 14 percent, while chemicals and steel fell by 8 percent. Blue chip stocks like Samsung Electronic Co, SK Telecom, Korea Telecom, Pohang Iron and Steel Co, and the Korea Electric Power Corp, all surrendered ground. On the other hand, the sharp rise of international gold and oil prices bolstered proceeds for oil and companies that deal with precious metals. Volume fell sharply to 241.64 million from 609.73 million the previous day on a turnover of 1.64 trillion won.

"The sell-off is the worst I have ever seen, and uncertainties should continue to depress the market," said an analyst for LG Investment and Securities Co. He said that time is needed before any predictions can be made on the future of the domestic and global markets.

The KSE, meanwhile, said that domestic stocks fell most of all Asian markets. The over-the-counter Kosdaq Index also fell 7.16 points or 11.58 percent, also an all time record drop, to 54.64. The shock caused 646 company shares to post losses, with only 11 companies climbing. Two companies' stocks remained unchanged. Kosdaq officials added that 591 shares hit their daily lows. Turnover stood at 125.56 million shares changing hands, with 755.09 billion won worth of deals taking place.

Foreign financial institutions were reluctant to trade on the Korean foreign exchange market, the Financial Supervisory Service (FSS) said. Even though trading is being carried out as normal, foreign banks' local branches have stayed inactive, resulting in liquidity problems in the local market. The local offices of foreign banks were instructed to avoid taking part in trading on foreign markets by their headquarters, the FSS reported. Local banks and individual investors have been trading as normal with individual investors adopting a selling position in Seoul. However, they have delayed settlements of import bills, the FSS added.

International oil prices are expected to move upwards following the attacks, the Korea National Oil Corp (KNOC) said. The state-run oil firm said the threat of retaliation by the United States, which could escalate global tensions, and speculative buying by profit mongers interested in making money out of the expected instability, could escalate to the situation. Seasonal demands would also contribute to the rise of prices, the corporation said.

The KNOC said that the price for a barrel of Dubai crude that will be delivered next month, climbed to US$26.14 Tuesday, up US$1.29 compared to the previous day. The Dubai brand accounts for 70 percent of all oil imported into the country. It is the second time this year that it entered the $26-range since June 12, when it reached $26.30. KNOC forecast that global oil prices should move between $26 and $28 for the time being.

Reflecting this, the price of West Texas Intermediate rose to $27.52 per barrel in spot transactions before authorities suspended trade, while North Sea Brent crude was quoted at over $31.05 at one point, a $3.70 per barrel rise from Monday. North Sea crude stabilized at around $28.65 later on.

Elsewhere

Singapore shares fell almost across the board, pulling down the main index by 7.4 percent to a 30-month low as investors dumped stocks in the aftermath of the attacks. The Straits Times Index (STI) plunged 116.31 points to finish at 1,450.45. The market reached a high of 1487.7 on strong buying pressure before profit-taking caused the index to return all its gains. It fell to a low of 1426.9 later. It recovered from that level subsequently. The stocks that recorded the maximum gains were ST Engg and SPC. TyeSoon and Presscrete were the top stocks in terms of percentage gains. San Teh and Kian Ho were the maximum losers in percentage terms. The most actively traded shares were SingTel and Interfm.

Indonesian shares ended sharply lower. The JSX Composite Index ended down 3.5 percent, or 15.630 points, at 429.847.

(Asia Times Online/Asia Pulse)