Asia shares slip on euro fears, Kim death

December 19, 2011
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, HONG KONG, Dec 19 – Asian shares fell Monday with Europe’s debt crisis hitting sentiment, while news that North Korean leader Kim Jong-Il had died also weighed amid uncertainty over the geopolitical outlook.

Markets began the day on a low after Belgium’s credit rating was cut, France’s outlook was lowered and six other eurozone members were put on downgrade watch.

Seoul closed down 3.43 percent, or 63.03 points, at 1,776.93, Tokyo shed 1.26 percent, or 105.60 points, to close at 8,296.12 and Sydney tumbled 2.38 percent, or 98.8 points, to 4,060.4.

Hong Kong lost 1.18 percent, or 215.18 points, to end at 18,070.21, Shanghai lost 0.30 percent, or 6.61 points, to end at 2,218.24 and Taipei fell 2.24 percent, or 151.76 points, to 6,633.33.

North Korean state television said the 69-year-old Kim died on Saturday and that the isolated communist nation must now follow his son Kim Jong-Un.

Stock markets extended their already deep losses amid nervousness about the future direction of the nuclear-armed country, with little known about Kim Jong-Un, who is in his late 20s and considered inexperienced.

“Kim Jong-Il’s death is the latest spanner in the works. Although a succession plan was already in place, change means uncertainty and uncertainty is not good for markets,” said Stan Shamu, strategist at IG Markets in Melbourne.

South Korea’s government went on an emergency footing, the South’s Yonhap news agency reported. A meeting of the National Security Council was summoned.

Deputy Finance Minister Choi Jong-Ku said authorities in Seoul would monitor financial markets.

The US dollar jumped to 1,199.00 Korean won after the news of Kim’s death, from 1,164.30 before. It later eased to 1,174.20.

And in Japan the government called an emergency security meeting to formulate its reaction.

“Uncertainty is mounting as there are worries over the direction of North Korea and its leadership,” Ichiyoshi Investment Management fund manager Mitsushige Akino said.

“Investors are simply in a rush to liquidate their positions,” he told Dow Jones Newswires.

On Friday, Moody’s Investors Service cut Belgium’s credit rating by two notches, citing tough conditions for in-debt European countries to borrow with little chance of a quick end to the eurozone crisis.

The agency reduced Brussels’ rating to Aa3, with a negative outlook, from Aa1.

Fitch Ratings lowered its outlook on France’s triple-A rating to negative from stable, saying the debt crisis “constitutes a significant negative shock to the region and to France’s economy and the stability of its financial sector”.

The agency also placed six eurozone nations, including Spain and Italy, on watch for downgrade, saying it considered a “comprehensive solution” to the crisis was technically and politically beyond reach.

Hiroichi Nishi, general manager of the equity division at SMBC Nikko Securities, said: “Downgrades don’t really surprise us these days, but they will still weigh on sentiment.”

The dire warnings from the ratings agencies came ahead of a European finance ministers’ teleconference on Monday that will aim to fill in details of this month’s debt-fighting agreement.

The talks, which will include non-euro members, will also discuss boosting International Monetary Fund (IMF) coffers to enable it to come to the aid of floundering economies.

At the recent summit, which saw Britain block plans for EU treaty change to save the currency, member countries announced plans to pump 200 billion euros ($260 billion) into an IMF warchest.

The euro bought $1.3026 and 101.45 yen in Asian trade Monday, compared with $1.3032 and 101.37 yen in New York late Friday.

The dollar was also at 77.87 yen, up from 77.81 yen.

On oil markets, New York’s main contract, light sweet crude for delivery in January, fell 81 cents to $92.72 a barrel while Brent North Sea crude for February shed 79 cents to $102.56.

Gold was trading at $1,595.66 an ounce at 0810 GMT, against $1,590.95 an ounce late Friday.

In other markets:

— Manila gained 0.31 percent, or 13.18 points, to 4,318.12.

SM Investments rose 3.1 percent to 547.50 pesos and Philippine Long Distance Telephone added 1.5 percent to 2,534 pesos while BDO Unibank fell 2.7 percent to 57 pesos.

— Wellington ended 0.69 percent, or 22.31 points, lower at 3,223.04.

Fletcher Building tumbled 4.1 percent to NZ$5.92 and Nuplex was down 1.8 percent at NZ$2.17. Property stock DNZ was up 1.6 percent at NZ$1.25.

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