VARIOUS: Asian stocks extend rout; yen up on risk aversion

Fears of a global credit crunch has boosted the yen and plunged the Tokyo Stocks Exchange down more than five percent, other Asian stocks headed for their biggest weekly fall in nearly a decade. Asian stocks headed for their biggest weekly fall in nearly a decade on Friday (August 17) after the Tokyo Stock Exchange closed down nearly five percent and the yen continued to strengthen after stubborn credit fears drove investors away from risky trades. The Nikkei average was one of the worst hit in the region as it posted its biggest percentage drop since September 12, 2001. It closed down 5.4 percent to its lowest close in a year and down nine percent this week. For the year, the Nikkei has fallen 11 percent. Major exporters, hit by the stronger yen and fears of a slower global growth, such as Honda Motors, Canon Inc and Toyota Motor all lost more than 7 percent. On the street, Japanese office workers worried about further falls. "As many traders will keep a wait-and-see stance for a while, I think the stock price will remain in an unstable condition in the longer term even though prices could rebound on a short term basis," said 61-year-old stock trading instructor Mitsuo Fukui. Some even showed concern that sharp stock falls could exert a negative impact on Japan's real economy. "This sharp drop in stock is likely to have an adverse affect on our daily lives. I am a little worried about it," said Naomi Kashirajima, 43-year-old nurse. "I am afraid the price could drop further. I don't think this trend of sliding price will stop soon," added 56-year-old company employee, Wataru Hamanaka. Analyst in the region say the drop in the market reflects the pulling power of the credit crunch in the United States. "As liquidity conditions tighten, money tends to move back to domestic markets, to domestic asset classes, a flight to quality. So money is being withdrawn from this region and that is obviously having an overall impact on investor sentiment," explained Mark Konyn, CEO of RCM Asia Pacific. Asia Pacific policy chiefs and central bankers urged calm on Friday as market turbulence continued to rock the region and despite some initial mistakes analysts added that central banks will now be treading very carefully in this period.

ITN Source | August 17, 2007

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