(1888PressRelease)
May 23, 2009 - Asian stocks wilted Friday as the possibility of credit rating downgrades for major economies and bleak unemployment figures in the U.S. added to fears the recent massive rally was built on shifting sands.
After piling into battered markets over the past two months, running up gains of 30 percent or more from Asia to the U.S., investors are increasingly hard pressed to justify hopes that a global economic recovery is around the corner.
In the U.S. and Europe overnight, markets were unnerved by a credit agency warning about the British government's debt ratings. That could signal similar problems for the United States and other big economies staggering under a growing mountain of debt as they try to spend their way out of recession.
An employment report from the world's biggest economy was equally as dispiriting. Though the number of newly laid-off workers seeking unemployment benefits in the U.S. fell 12,000 to 631,000 last week, continuing claims rose to 6.7 million, hitting a new record for the 16th consecutive week in data that goes back to 1967.
The unrelenting bad news and recent losses on Wall Street were leading many investors to reassess their expectations about the economy and the recent rally, analysts said.
"It seems the markets are at a crossroads. What were seeing today is a lot of confusion," said Stephen Yang, an Analyst with Seedorf Luxman & Partners in Singapore. "The markets here are trying to digest what is truly happening in the U.S. and trying to balance that with Asia."
"There is no consensus view right now, and that's leaving investors confused," the Seedorf Luxman & Partners Analyst said.
In Tokyo, Japan's Nikkei 225 stock average gave up early gains to drop 51.94 points, or 0.6 percent, to 9,212.21, while Hong Kong's Hang Seng index was off 323.39, or 1.9 percent, at 16,876.10. Elsewhere, South Korea's Kospi slipped 0.5 percent and Australia's benchmark was down 1.3 percent.
Among the few gainers, Taiwan rose 0.4 percent and Malaysia's index rose 0.3 percent.
The far-reaching consequences of the global recession were underlined Thursday by Standard & Poor's warning that Britain's credit rating may be cut because of rising debt levels. That would raise the cost of borrowing for the British government, which is taking a big role in bailing out that country's stricken banking system, and could mean similar warnings for other debt-laden governments.
Yang said “The S&P warning shows there are limits to how much debt governments can take on even when it's part of efforts to revive staggering economies. And even after governments pumping hundreds of billions of dollars into economies around the world there are still questions about how soon a rebound might take hold.”
Seedorf Luxman & Partners are a specialized advisory and consultancy company that provides investors with the resources necessary to find small stocks with tremendous growth potential, unknown to the general investing public. All of our team with comprehensive fields of expertise are driven by a focus upon helping our clients meet their investment objectives. Whether you are an individual investor or an institutional client we will provide an excellent level of service.
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