Germany announced yesterday a ban on unsecured sales of sovereign and other debt. Asian shares react negatively to the announcement as the euro drops further. Many fear that Europe’s crisis might be worse than it appears to be, and that it could lead to a financial crisis like that of 2008.

Hong Kong (AsiaNews/Agencies) – Asian stocks dropped to a three-month low, European stock futures plunged, German bunds jumped and metals fell as the euro traded at 1.22 against the US dollar, near its lowest level in four years. This comes after German Finance Minister Wolfgang Schaeuble banned investors from buying credit-default swaps on sovereign debt from the Euro zone or selling unsecured stocks from the ten largest German financial institutions unless they own the underlying bonds. The goal is to prevent speculative moves that could cause short-term price changes, undermining the entire financial system.

The German ban will last until 31 March 2011, but it has made investors jumpy over a number of possible scenarios that could materialise should the crisis of the Euro zone get worse.

It “creates a view that the authorities sense bigger problems than what may appear on the surface, creating more nervousness and fear,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc.

Many people fear that German’s concerns might be due to yet-to-be-released information, and that the ban, if not well explained, could cause panic and drive many investors away from the stock market.

Meanwhile, in Tokyo the MSCI Asia Pacific Index lost 1.2 per cent yesterday, 11 per cent from its high for the year on April 15.

Oil slumped to a seven-month low and copper dropped 1.2 percent.

In Asia, people are concerned that Europe’s crisis will directly affect their exports with a falling euro making their exports less competitive and their products more expensive.

Shares in Tokyo and Seoul only lost less than one percentage point. Hong Kong shares slid 1.83 per cent to their lowest closing level in more than three months.

In Japan, exporters are seeing orders dry up. The Nippon Sheet Glass Co., which gets 42 per cent of its revenue from Europe, tumbled 4 per cent in Tokyo. Canon Inc., a camera maker that counts Europe as its largest market, dropped 1.3 per cent. The Shanghai Composite Index lost 0.3 per cent after rebounding yesterday.

“The developments in the euro zone are very disturbing, from the point of view of Chinese investors,” said Jackson Wong, investment manager at Tanrich Securities. “There are fears that the euro zone might break up and that will create the chaos we saw in 2008” when shares and investments dropped dramatically.

• asia
• europe
• germany
• shares
• stocks
• exports
• euro
• speculation
• zone
• credit-default
• swaps
• sovereign
• debt