Asia, too, feels the pain

Can a part like Asia - with more than $3 one million million million in foreign exchange modesty, high economy rates, largely well-capitalized banks and minimal exposure to American mortgage-backed securities - run into problem during a global financial crisis?

The reply Friday was a resounding yes.

Stock marketplace plunged from Tokyo to Bombay. Real estate prices are acrobatics from Seoul to New Delhi. The economic system in capital of Singapore has tipped into recession, and there is growth evidence of a recession in Japan, where an unlisted insurer and a real estate investment trust filed for bankruptcy  Fri.

From UBS to Lewis Henry Morgan Stanley, investing banks have been warning in the past week of a global economic downswing. For Asia, that sounds uncomfortably like a prognosis that economic slowdowns in the United States and Europe will cripple demand for Asia's exports and pull the part down into recession as well.

What went wrong? As the biggest beneficiary of the rise in global trade, Asia depends heavily on exports to the West. Everything from corporate earnings to real estate prices depends on a sweetheart inflow of dollars and euros.

growing in exports has slowed to a crawl or started declining across most of the part when calculated in local currency terms and adjusted for rising prices. And that is even earlier Western shop have had a opportunity to cut back their orders in response to the sort of steep declines in sales that American retailers announced on wed.

India announced Friday that industrial production in Aug was 1.3 percentage higher than a year before. That was a drastic deceleration from July, when the growing rate was 7.4 percentage.

In Korea, exporters are all of a sudden struggling.

"The job is the global recession - people don't buy consumer electronics, this means less exports and fewer dollars for us," said Choi Hae Pyong, an electronics parts manufacturer south of Seoul. "It's like walking in a thick fog."

As long as the region kept exporting and kept saving the proceeds, investors bid up real estate and share prices that now seem to have a long way to fall.

Matthew Au, a luxury real estate broker in Hong Kong, said that this past week had been even worse than the days after the Tiananmen Square killings on June 4, 1989, which briefly shattered business confidence here.

"I've been through June 4th, the 1997 financial crises and SARS, but this time around, the decline in housing prices has been the most abrupt," he said. "Sellers of properties are now more willing to consider offers which come in 20 to 30 percent below their asking prices."

As global financial markets increasingly look to each other for direction, lack of confidence in financial institutions and housing markets in the West has also proved contagious in Asia. The Asian news media, often focused on economics instead of potentially touchy political issues, have been full of reports in the past three weeks about failing banks and falling real estate prices, and that has fed through into local markets.

An outflow of Western investment has also played a role in Asia's decline now, although foreign investment has become less important in much of the region as Asia has become a formidable saver in its own right.

In Malaysia, foreign investors held nearly a third of Malaysia's national debt until they started selling this summer to raise money so as to cover losses in other markets.

In Korea, foreign investors sold $29 billion in the first nine months of this year. This was an important reason why the country's foreign exchange reserves have slipped to a still formidable $239.7 billion last month from $264.2 billion in March.

Many in Asia now despair of help from the West, and are looking to Beijing.

"The United States is beyond saving - our only hope rests with China," said Dick Chen, a middle-aged manager in a pin striped blue shirt and carrying an ultraslim modern mobile phone who watched the markets with dismay after lunch in a trading room of Tai Fook Securities in Hong Kong.

Can China save Asia? For the past six years, the Chinese economy has been like an enormously powerful hound that has charged ahead despite every obstacle. Worried that the economy may overheat and accelerate inflation, Beijing officials have run a budget surplus, repeatedly raised interest rates and even required banks to deposit a remarkable one-sixth of their entire assets as reserves at the central bank to slow lending.

Now Beijing is trying to loosen the leash it has had on the economy by cutting interest rates and taxes and lowering reserve requirements. But the government is finding the economy already looks a little out of breath as exports slow.