Asian exchanges in calmer water but worse still to come
Hong Kong (AsiaNews/Agencies) – Asian markets rallied a bit today with some bourses making modest gains and others ending the day with small losses, all thanks to central banks’ decision to reduce interest rates. But the International Monetary Fund (IMF) and US Treasury Secretary Henry Paulson have warned of tough times ahead.
Hong Kong shares rallied 2.7 per cent after losing 8 per cent yesterday. Tokyo rebounded by 1.9 per cent but ended with a slight loss of 0.5 per cent. Yesterday it had suffered its main hit in four years, losing almost 10 per cent. The Shanghai Composite Index, which had tumbled 8.79 per cent over the previous three days, ended on a 0.84 per cent loss.
In order to fix the financial system, the US Federal Reserve, the European Central Bank, and the central banks of Canada, the United Kingdom, Sweden, Switzerland and China have cut interest rates in an unprecedented coordinated action. Today Taiwan and South Korea followed suit. Japan has not done it but it has injected 20 billion dollars US into money markets
All these emergency steps have not eliminated what investors have called the “shadow of a crisis without precedents.”
Yesterday Secretary Paulson warned that the despite the US$ 700 billion rescue plan, other bank can still go bankrupt and that the financial crisis will not end anytime soon.
The International Monetary Fund warns that the world economy is in for a recession.
“Many advanced economies are close to or moving into recession, while growth in emerging economies is also weakening,” the IMF said.
This comes a day before a G7 meeting in Washington where the richest countries in the world will meet to discuss the global economy and poverty.
The US economy will expand a mere 0.1 per cent next year after growing 1.6 per cent this year, whilst the global economy will expand 3 per cent, down from 3.9 per cent this year, the IMF said in a draft of its World Economic Outlook.