Asian Markets Plunge, Record Low in Rupee

123jump.com Staff
10 Oct, 2008
New York City

Asian markets plunge as global credit markets remain seized. Yamato Life in Japan filed for bankruptcy protection on sharp losses in investment portfolio. Markets in India plunge to as low as 9.6%, rupee drops to a record low and the RBI lowered the cash reserve ratio for banks.

[R]3:30AM New York – Asian markets plunge more than 7% as investors flee from risk. Crude oil dropped to $86 a barrel. India lowered its cash reserve for banks as rupee plunges to record low.[/R]

Asian markets tracked losses in the New York trading and fell more than 5% across the region.

Ahead of meeting of G7 nations, investors are increasingly lowering their economic growth expectations and earnings outlook for the rest of the year. Increasingly, Asian investors are looking for economic recession in the U.S. and not a slow down as the U.S. regulators keep repeating.

In New York, the New York Fed injected another $38 billion in the troubled insurance giant AIG and other insurance companies warned of lower earnings and losses. Prudential Financial joined MetLife and Hartford Financial and declared pre-tax loss of $700 million linked to investment in AIG and Lehman Brothers.

Yamato Files Bankruptcy Protection

Yamato Life in Japan filed for bankruptcy protection after heavy losses in its investment portfolio. The 98-year old life insurance company had recently increased its exposure to risky alternative investments and derivatives that has declined in value in the last few months.

The insurance company reported 270 billion yen of debt more than its assets. The latest meltdown in the global financial markets have plunged many Asian markets into record loss territory. Yamato bankruptcy filing is the first insurance failure in seven years after the demise of Tokyo Mutual Life Insurance Company according to the data from insurance regulators in Japan.

Financial Services Agency in Japan reported that the losses at Yamato exceed by 6 billion yen than expected loss of 11 billion yen by the company for the first six months ending in September 30.

The recent economic turmoil has increased corporate bankruptcies in Japan by 34% according to Tokyo Shoko Research Ltd, as reported on Bloomberg News.

Rupee in India Drops, RBI Lowers CRR

The Reserve Bank in India lowered the cash reserve requirement to 7.5% from 9% which will add nearly 12 billion rupees in the financial system. The move came after the overnight interest rate surged to 23% from 10.5%. The rates have risen sharply as banks have curbed lending to each other.

Sensex index in the morning plunged to as low as 9.5% before recovering to a decline of 6%. The Sensex has fallen nearly 50% for the year as foreign investors flee emerging markets.

India also is battling rising inflation as crude oil import bill has surged to $100 billion for the current fiscal year.

Rupee dropped to a record low of 49.26 as foreign investors sell stocks and securities and repatriate the investments.

ICICI Bank plunged more than 25% ahead of the company announcement of expected losses in foreign securities. The bank fell 111.75 to 342 rupees.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 780.54 or 8.52% to 8,376.95, Hang Seng index in Hong Kong decreased 1,121.31 or 7.03% closed to 14,821.93. CSI 300 index in China lower 78.39 or 3.93% closed to 1,916.91. ASX 200 index in Australia decreased 360.20 or 8.34% to close 3,960.70. The KL Composite index in Malaysia lower 30.65 or 3.16% closed to 938.24.

The Kospi Index in South Korea decreased 67.14 or 5.18% to close at 1,227.75, SET index in Thailand closed lower 40.59 or 8.12% to 459.40. The Sensex index in India decreased 605.01 or 5.34% closed to 10,723.35. Market of Indonesia is closed today.