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Lehman collapse hits Asian shares Lehman collapse hits Asian shares
(about 2 hours later)
Leading Asian markets have plunged in the aftermath of the demise of top US investment bank Lehman Brothers.Leading Asian markets have plunged in the aftermath of the demise of top US investment bank Lehman Brothers.
Shares in Japan, South Korea, China and Taiwan are down by 4 to 6%, having been shut on Monday for a bank holiday. Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays.
The figures reflected earlier falls in Europe and the US, which on Monday had its worst day's trading since 9/11.The figures reflected earlier falls in Europe and the US, which on Monday had its worst day's trading since 9/11.
The fourth-largest US investment bank, Lehman filed for bankruptcy protection on Monday, becoming the latest victim of the global credit crunch.The fourth-largest US investment bank, Lehman filed for bankruptcy protection on Monday, becoming the latest victim of the global credit crunch.
Japan's benchmark Nikkei-225 index dropped 5.3% in morning trading, Shanghai's index fell around 4%, and shares in South Korea and Hong Kong shares shed about 6% in value. Japan's benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai's index fell by about 3%.
Big banks can no longer be under any illusion that they can make big, stupid financial bets and expect taxpayers to pick up the bill Robert Peston, BBC business editor Read Robert's blog
Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.
The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, threatened to deal a further blow to other financial institutions, as they unwind deals with the former investment giant. Central banks in the region attempted to calm markets and the Bank of Japan injected 2.5 trillion yen ($24bn; £13bn) into the banking system.
Shockwaves Australia and India also pumped cash into their money markets.
The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, threatens to deal further blows to other financial institutions, as they unwind deals with the former investment giant.
"We're in the middle of a crisis," said YK Chan at Phillip Asset Management in Hong Kong.
Stock markets in Europe plummeted on Monday as Lehman's failure raised fears about the strength of the global financial system. Banking shares were hardest hit. I am confident that our financial markets are flexible and resilient and can deal with these adjustments US President George W Bush US policy challengeQ&A: Lehman collapseLehman pension scheme in deficitStock markets in Europe plummeted on Monday as Lehman's failure raised fears about the strength of the global financial system. Banking shares were hardest hit. I am confident that our financial markets are flexible and resilient and can deal with these adjustments US President George W Bush US policy challengeQ&A: Lehman collapseLehman pension scheme in deficit
On Wall Street, the Dow Jones industrial average fell nearly 4.5%, while the FTSE 100 index of leading UK shares closed down 4%.On Wall Street, the Dow Jones industrial average fell nearly 4.5%, while the FTSE 100 index of leading UK shares closed down 4%.
Meanwhile, there are fears AIG, once the world's largest insurers, could also face collapse. It is taking steps to raise money amid reports it is seeking an emergency loan from the US Federal Reserve. Meanwhile, there were fears AIG, once the world's largest insurers, could also face collapse.
Central banks have moved to reassure markets. The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of $39bn into the financial system. The State of New York has announced a "multi-billion dollar financing plan" to stabilise the insurer's finances.
Merrill Lynch, another leading US investment bank also stung by the credit crunch, agreed to be taken over by Bank of America in a dramatic weekend of events for Wall Street. Central banks in Europe and the US have also moved to reassure markets.
The $50bn deal means that three of the top five US investment bank have fallen prey to the financial crisis within six months. The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of $39bn into the financial system.
'Rough spots ahead' 'Rough spots' ahead
Earlier, US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses". US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses".
Paulson upbeat despite turmoil Henry Paulson was upbeat despite the turmoil
He said Americans could remain confident in the "soundness and resilience" of the US financial system.He said Americans could remain confident in the "soundness and resilience" of the US financial system.
But he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead until the correction of the US housing market was completed.But he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead until the correction of the US housing market was completed.
Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".
But he gave no details of what such steps might mean.But he gave no details of what such steps might mean.
Earlier in the day President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments." On Monday President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments."