Asian Economy

North Korean’s Kim Jong Il’s Death Sends Asian Stocks Tumbling

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The shocking death of North Korea’s leader has sent Asian stocks tumbling, deepening concerns regarding the financial market.

Kim Jong Il’s death was announced last night in Pyongyang, the North Korean capital. Stability in the region has been compromised, and the reclusive regime will now undergo a major change in leadership.

South Korea’s Kospi index initially fell 4.1%, but later regained to trade 3.1% at 1,782.50. The won also slid 1.6% against the dollar. Aside from that common safe haven, the yen and the euro sank as well.

Japan’s Nikkei 225 index fell 1% at 8,314.44, while the Hand Seng plunged 2.5% to 17,833.42. Similarly, the Shanghai Composite Index fell 2.6%.

Tensions on the Korean peninsula have heightened, and South Korea has put both its police and military on high alert. President Lee Myung-Bak also convened national Security Council meetings. Japanese leaders are keeping an eye on markets, and are in touch with the U.S.

“We need to prepare for any contingencies,” said Jun Azumi, according to Kyodo News Agency.

Asian Markets Take Hit as Recession Worsens

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Though the debt crisis has struck the U.S. and EU with fervor, Asian markets have seen some major hits recently as well. The selloff is a result of global recession concerns, as well as worries regarding the financial fragility and cash crunch.

“The way markets are trading, people are anticipating some kind of falling off the cliff,” said Wendy Liu, head of China research for Royal Bank of Scotland. “These valuations don’t come every year.”

Hong Kong’s Hang Seng Index has fallen 23% over the past year, which includes a 12% drop just this month. The MSCI AC Asia ex Japan Index, which tracks all markets throughout Asia, has seen a decrease of 24% this year.

Despite the drawbacks, the Asian economies have recorded solid growth. Until quite recently, central banks were raising interest rates in an effort to lessen inflation.

According to Markus Rosgen, head of Asia Pacific Equity Strategy at Citigroup in Hong Kon, “Markets in Asia are telling you there is going to be global recession.” He added that stocks are pricing in an approximately 33% drop in corporate earnings.

Ewen Cameron Watt of BlackRock backed this, stating “The degree of selloff in emerging-market debt and equities and currencies suggest there is something more than a concern about slowing economies at play here.”