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Governments urge calm in face of market turmoil

Ministers in Asia and Europe advise investors to stay rational and not overreact

HONG KONG – GOVERNMENTS urged calm yesterday while calling for international cooperation to cope with a global slide in stock markets sparked by fears of a United States recession.

Asian markets experienced a day of heavy losses, with Hong Kong share prices suffering their biggest ever one-day slide, closing down 8.7 per cent, while bourses in Europe also opened in negative territory.

French Finance Minister Christine Lagarde said US President George W. Bush’s US$140 billion (S$201.9 billion) stimulus package for the American economy was a ‘bit vague’ and called on him to spell out his plans more fully.

‘I think he must go further to explain precisely how these billions of dollars are going to be injected into the economy,’ Ms Lagarde told French radio, as French share prices shed 2.57 per cent at the start of the day’s trading.

In Japan, Economics Minister Hiroko Ota told a news conference that the government saw no need for the time being to intervene to halt the rout.

‘Stock markets across the world are falling, and it basically stems from the US,’ she told reporters, before Japanese share prices tumbled 5.65 per cent to a 28-month low.

‘It is difficult at the moment to mull over action by Japan alone. Instead, we should cooperate globally,’ she said.

Mr Bush announced his economic stimulus package of tax cuts and other measures last Friday, but the proposal has failed to allay concerns about the health of the world’s No.1 economy.

Indian Finance Minister Palaniappan Chidambaram, whose country’s shares lost more than 7 per cent in early afternoon trade, urged investors to ignore the financial woes in the West.

‘My advice to investors is to stay calm,’ he said. ‘Corporate profits are high, corporate income tax is at an alltime high in terms of growth. There’s no reason at all to allow the worries of the Western world to overwhelm us.’

Australian share prices plunged by 7.1 per cent yesterday in the biggest one-day fall since October 1997, but the government said the country was likely to be able to weather the storm.

‘We are well-placed to ride out the turbulence that flows from events in the US, even though we are not immune to it,’ said Treasurer Wayne Swan.

‘The prospects for ongoing growth in Asia and the developing markets are assisting us to withstand the fallout occurring elsewhere.’

Meanwhile, European finance ministers said a global stock market slump and an economic slowdown in the US threaten to slow growth in Europe more than forecast.

‘The economic situation and financial markets are highly volatile and uncertain, a good deal more uncertain than usual,’ Luxembourg Finance Minister Jean-Claude Juncker said on Monday in Brussels after presiding over a meeting of counterparts from the euro region.

‘If there is a real slowdown in the US, obviously that would be felt in the euro zone.’

Stock market volatility has heightened uncertainty on the outlook for economic growth in the 15 nations that use the euro, according to a European Union briefing document obtained by Bloomberg News.

The draft document was discussed at Monday’s meeting of finance ministers.

Still, ‘it would be a mistake to fall victim to excessive pessimism’, Mr Juncker told a press conference after the meeting. ‘We shouldn’t overreact to events on the stock exchange.’

AGENCE FRANCE-PRESSE, BLOOMBERG NEWS

DON’T BE OVERWHELMED

‘My advice to investors is to stay calm. Corporate profits are high, corporate income tax is at an all-time high… There’s no reason to allow the worries of the Western world to overwhelm us.’

MR CHIDAMBARAM, India’s finance minister

Source: The Straits Times 23 Jan 08

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