01/21/2009, 00.00
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World stock markets decline overshadows Obama’s first day as president

Asian markets are down today after Wall Street fell yesterday. Bank shares are in a free fall. British banks are “technical insolvent.” Experts say US banking system is “insolvent” as well.

Hong Kong (AsiaNews/Agencies) – Almost every Asian stock market lost today. Bad news about US and British banks raise concerns on Barack Obama’s first day as US president. Yesterday Obama vowed to “begin the work of remaking America” but many analysts are pessimistic about Obama’s possibility to easily revive the world economy.

In Japan the Nikkei Index dropped by 2 per cent. Hong Kong’s Hang Seng Index lost 2.9 per cent. Seoul and New Delhi lost 2 per cent or more, whilst Shanghai declined by 0.5 per cent. Only Taiwan made modest gains.

In the latest sign of strain, Singapore slashed its 2009 growth forecast for a second time this month, saying the economy could shrink from 2 to 5 per cent. The previous forecast had put growth at -2 to + 1 per cent.

Yesterday in New York, shares on Wall Street plunged sharply as Obama took office, with the Dow Jones industrial average leaving 4 per cent on the floor.

The greatest losers where bank stocks—none was spared the carnage. Bank of America's shares plunged 29 per cent; Citigroup's 20 per cent; State Street Corp saw its shares melt by 59 per cent.

At the core of the free fall in bank shares were concerns that US officials would have to overhaul their programme of shoring up financial institutions; this a day after Britain announced its second financial bailout package for its own struggling banks in three months.

In fact Britain’s biggest banks are “technically insolvent”, the Royal Bank of Scotland said yesterday.

The US banks are much in the same predicament. Financial losses might reach US$ 3.6 trillion, [50 per cent] of them by banks and broker dealers,” New York University professor Nouriel Roubini said. “If that's true, it means the US banking system is effectively insolvent [. . .]. This is a systemic banking crisis,” he added.

At the same time Hong Kong experts are warning Obama’s team against a new US$ 800 billion stimulus package which might simply hide the problem and lead to more inflation.

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