Asian stocks have been hit hard this year by the subprime- and credit-related writedowns in the global financial sector. -- PHOTO: REUTERS

Even as the US central bank took the latest desperate measures to calm a financial storm in the United States which is spinning out of control, there is already a host of speculation over the next likely victim of the global credit crunch which erupted last August.

This followed news that US investment bank JP Morgan is buying rival Bear Stearns for just US$2 a share and the US Federal Reserve cutting the discount rate - the interest rate it charges banks for loans - by 0.25-percentage point - to 3.25 per cent before the opening of Asian markets.

It was chaos in the regional foreign exchange market, as the ailing green-back sank to a 13- year low of 96.98 yen after dropping an eye-popping 3.57 yen, while the euro gained 2.8 US cents to a record high of US$1.5839.

Gold - a traditional refuge in times of troubles - rose US$21 to a record high of US$1024 an ounce. And reflecting the global nature of the fears now stalking financial markets, London?s FTSE 100 Index is down 2.1 per cent, while Paris's CAC-40 Index has fallen 2.9 per cent, in response to the latest Fed moves.

At the epi-centre of the Asian sell-down was Hong Kong, with the Hang Seng Index sinking 5.2 per cent at the close.

But in Singapore, the benchmark Straits Times Index managed to pare part of its losses, closing 1.6 per cent, or 46 points, down at 2793, after losing close to 90 points at the opening bell.

But this only masked a far bigger sell-off in the broad market, where China plays, as measured by the FTSE ST China Index, tumbled 5.5 per cent.

Mid-cap stocks fell 2.3 per cent, while small-capitalised shares - gathering firms with less than $1 billion in market value - were down 3.4 per cent.

'Hong Kong is suffering a massive collateral fallout from the huge exposure of banks such as HSBC Holdings and Bank of China to the troubled US financial markets - whether it is directly through mortgages or through sub-prime debts,' said a dealer in Singapore.

The same goes for Japanese financial institutions which had lent heavily to the US markets. This caused Tokyo's Nikkei-225 Index to tumble 3.7 per cent.

But banks in Singapore are viewed as safe-havens as they have already written off the bulk of their US collateralised debt obligations and derived the bulk of their earnings from the ultra-safe Singapore loans market.

At mid-day, DBS Group Holdings was down 16 cents at $16.70, after slipping to a low of $16.40, while United Overseas Bank was actually up 14 cents at $17.38, after falling to an intra-day low of $16.74

'When systemic risks threaten the global financial system, investors are wary of big financial institutions which may have dealings with counter-parties that may collapse. This is why global banks are so badly-whacked today,' the dealer added.

For many, the sell-down is a reflection of fears that a big US financial institution may fail and drag other banks down with it.

Experts agree. In a note this morning, Deutsche Bank Wealth Management's chief Asian strategist, Marshall Gittler, noted that the US Fed's loan to Bear Stearns is a reflection that 'it thinks that the financial sytem itself is at risk'.

Many are also anticipating the Fed to cut its key Fed funds rate - the interest rate which US banks lend to each other - by a massive 1 percentage point to 2 per cent on Tuesday when it meets for its regular rates-fixing meeting.

But given the gravity of the problem, few are anticipating easy fixes to the grave dangers facing global financial system.

But it is a different story for other counters in which hedge funds have a big exposure.

As the Japanese yen raises against the dollar, and hedge funds cannot find the money to top up their margin calls, they have been forced to liquidate their stock holdings.

This caused stocks such as Singapore Exchange to tumble by 37 cents to $6.43, and Cosco Corp to fall 15 cents to $2.90. Both counters had attracted large number of hedge funds in their spectacular run-ups last year, and are now encountering big sell-downs, as the hedge funds liquidate their positions.

'Each measure taken by the Fed has only given temporary relief. Cutting interest rates by 1 percentage point will only point the way to more panic. It may be best to stay out of the market until all this madness is over,' one trader observed.

KUALA LUMPUR

Malaysian share prices closed 1.5 per cent lower on Monday amid fears that the United States economy may be headed for a severe recession, dealers said.

The Kuala Lumpur Composite Index (KLCI) closed down 17.31 points to 1,177.53.

HONG KONG
Hong Kong stocks tumbled across the board on Monday, weighed down by fears that troubled credit markets will claim more victims after brokerage JPMorgan Chase bailed out stricken rival Bear Stearns

The benchmark Hang Seng Index ended down 5.2 per cent to 21,084.61.

The China Enterprises Index of Hong Kong-listed mainland companies, or H shares, sank 7.2 per cent to 11,037.09 in its worst percentage one-day percentage loss in nearly two months.

SHANGHAI
Chinese share prices closed 3.60 per cent lower on Monday led by oil refiners and financials as investors took their cue from a weak US stock market, dealers said.

They said investor confidence was battered after a 1.60 per cent decline on Wall Street last Friday as the US Federal Reserve and JPMorgan Chase stepped in to rescue investment bank Bear Stearns.

The benchmark Shanghai Composite Index, which covers both A and B shares, fell 142.63 points or 3.60 per cent to 3,820.05 on turnover of 73.61 billion yuan (1.38 billion).

The Shanghai A-share Index was down 149.13 points or 3.59 per cent to 4,008.39 on turnover of 73.26 billion yuan.

The Shenzhen A-share Index shed 82.79 points or 6.36 percent to 1219.34 on turnover of 33.63 billion yuan.

TOKYO
Japanese stocks fell over 3 per cent to about a 2-year closing low on Monday, dragged down by exporters such as Toyota Motor Corp as the dollar hit a 13-year low against the yen, casting a cloud over their earnings outlooks.

Financial shares took a beating as the acquisition of Bear Stearns by JPMorgan Chase exacerbated fears that more financial institutions could become casualties in the widening US financial crisis.

The benchmark Nikkei average fell 3.7 per cent or 454.09 points to end at 11,787.51, its lowest finish since August 2005.

The broader Topix index shed 3.7 per cent or 43.58 points to 1,149.65, the lowest close since June 2005. -- REUTERS