Asian markets slump in response to U.S. financial rescue plan
Hong Kong (AsiaNews) - Asian markets failed to rally on the overnight agreement in the United States, to present Congress with a financial rescue plan of 700 billion dollars. The plan, discussed for a week by the Bush administration, the presidential candidates, and representatives of the two parties in Congress, heads for a vote today.
But Asian investors are still doubtful about its effectiveness.
The Nikkei index in Tokyo rose by 1% in morning trading, only to close with a loss of 1.26%, in spite of an injection of 1.9 trillion yen [about 12.4 billion euros] by the government, the ninth action of its kind in less than two weeks.
The Hong Kong market dropped 2.1% in morning trading, closing down by 4.29%; the Shanghai market today closed for a week, because of the celebrations for October 1.
In Kuala Lumpur, the indices were slightly negative; in Seoul, the broad market fell by 1.35%.
The agreement that will be presented today in Congress will permit the U.S. treasury to spend up to 700 billion dollars to buy bad mortgages held by struggling American banks.
The government will distribute the money in installments: 250 billion immediately; 100 billion at the request of the White House; the other 350 billion will be subject to congressional approval. The banks that accept the plan will have to grant stock warrants in exchange, permitting American taxpayers - responsible for all of the funding - to reap the benefits if the banks return to profitability. Compensation for bank executives will be reduced, and there will be no more of the "golden parachutes" that until now they have enjoyed upon leaving their jobs.
The operation is meeting criticism from many Democrats and Republicans, who do not accept such a massive state intervention in the financial world. Nancy Pelosi, a Democrat and the speaker of the house, has said that the plan is not a "bailout of Wall Street", but is aimed at guaranteeing pensions, savings, and jobs.
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