Beijing (AsiaNews/Agencies) – Asian markets started the week with a retreat. Japan's Nikkei stock average lost 2.9 per cent on Monday, briefly touching its lowest point since 1 May. At the same time analysts are now warning of new ‘toxic assets’, a prospect that is generating another wave of panic in financial markets.
Japan’s markets are still suffering from a strong yen, which is cutting into Japanese companies’ profit margins and reducing their competitiveness. Wall Street’s losses last Friday did nothing to help.
South Korea's Kospi was also down 1.00 per cent whilst Taiwan stocks inched up by 0.07 per cent.
New, potentially toxic assets are making matters worse. In order to get out of the mess created by last year’s subprime mortgage-backed securities flop, the US Treasury and Federal Reserve created a series of new asset-backed securities (collateralised by student and auto loans, etc), but they have not found any takers.
Investors and private lenders are extremely wary of these programmes. Banks desperately want to get government bailout programmes off their books but are stuck with them.
In fact even if the Fed can offer loans at advantageous terms to encourage new issues of debt securities in order to cleanse the system of old ‘toxic assets’, if investors don't want to play, they don’t play and the Fed has a problem. This is the current situation as very few investors seem willing to take on new securitised lending.