As US public debt worries Asia, shanghai index plunges
Asian nations believe Washington will overcome the current impasse between President Obama and Congress, but are still afraid that US debt will be downgraded. US treasury bills have always been safe investments for Asia. European shares are down as well.
Hong Kong (AsiaNews) – The Shanghai Composite tumbled 3 per cent on Monday over the failure by US President Barack Obama and Congress to reach an agreement to raise the US debt ceiling, increasing the chances of a debt default by the world’s largest economy.
For Shanghai, this was the biggest single-day percentage fall since mid-January. It was compounded by the decline of railway stocks after a deadly train crash on Saturday and the arrest of three senior railway officials.
However, uncertainty primarily stems from the situation in the United States. Asian nations hold about US$ 3 trillion in US securities. China tops the list with about US$ 1.16 trillion by China, but Japan, and to a lesser extent, Taiwan, Thailand, Singapore, India and South Korea are also exposed to the US crisis.
As a major importer of goods made in China and other Asian nations, the United States is likely to affect already declining Asian exports. Similarly, a drop in the value of US securities would have a domino effect on many Asian currencies. Meanwhile, as investors shift to safer shores to protect themselves, gold reached a record high.
Nevertheless, Asian markets are still betting that a last moment solution will be found in Washington, with Congress raising the debt ceiling before 2 August, the deadline when the US Treasury Department is expected to run short of money to pay all of its bills.
Experts note that the ceiling problem is political rather than economic, and that the United States has the means to overcome the crisis.
Others claim that the United States is not fully aware that the rest of the world is looking at what it is doing and that even if the current problem is settled, the uncertainty it has generated would still lead to the downgrading of the United States’ current triple-A rating.
For Xia Bin, an academic adviser to the People's Bank of China, Obama and Congress “will definitely reach a compromise”. Hence, we should not “worry too much about it.”
Speaking to top executives in Hong Kong, US Secretary of State Hillary Clinton said she was confident that Congress would secure a debt deal and “work with President Obama to take steps to improve our long-term fiscal outlook.”
“We in the United States are in the middle of a necessary transition. We must save more and spend less” and “borrow less as well,” Clinton added. “Our partners must meet this change with changes of their own.”
From there, Clinton headed for Shenzhen for a meeting with Chinese State Councillor Dai Bingguo that is expected to touch on a number of these issues.
In early morning trading, European shares were down, less due to the US situation than to Moody’s decision to downgrade Greece’s debt from CAA1 to CA, just short of a default.
For Shanghai, this was the biggest single-day percentage fall since mid-January. It was compounded by the decline of railway stocks after a deadly train crash on Saturday and the arrest of three senior railway officials.
However, uncertainty primarily stems from the situation in the United States. Asian nations hold about US$ 3 trillion in US securities. China tops the list with about US$ 1.16 trillion by China, but Japan, and to a lesser extent, Taiwan, Thailand, Singapore, India and South Korea are also exposed to the US crisis.
As a major importer of goods made in China and other Asian nations, the United States is likely to affect already declining Asian exports. Similarly, a drop in the value of US securities would have a domino effect on many Asian currencies. Meanwhile, as investors shift to safer shores to protect themselves, gold reached a record high.
Nevertheless, Asian markets are still betting that a last moment solution will be found in Washington, with Congress raising the debt ceiling before 2 August, the deadline when the US Treasury Department is expected to run short of money to pay all of its bills.
Experts note that the ceiling problem is political rather than economic, and that the United States has the means to overcome the crisis.
Others claim that the United States is not fully aware that the rest of the world is looking at what it is doing and that even if the current problem is settled, the uncertainty it has generated would still lead to the downgrading of the United States’ current triple-A rating.
For Xia Bin, an academic adviser to the People's Bank of China, Obama and Congress “will definitely reach a compromise”. Hence, we should not “worry too much about it.”
Speaking to top executives in Hong Kong, US Secretary of State Hillary Clinton said she was confident that Congress would secure a debt deal and “work with President Obama to take steps to improve our long-term fiscal outlook.”
“We in the United States are in the middle of a necessary transition. We must save more and spend less” and “borrow less as well,” Clinton added. “Our partners must meet this change with changes of their own.”
From there, Clinton headed for Shenzhen for a meeting with Chinese State Councillor Dai Bingguo that is expected to touch on a number of these issues.
In early morning trading, European shares were down, less due to the US situation than to Moody’s decision to downgrade Greece’s debt from CAA1 to CA, just short of a default.
.png)
See also
