Asian stock markets mostly higher on Citi report

AP Business Writer

(AP:HONG KONG) Asian stocks were mostly higher Monday, with Hong Kong and South Korea's benchmarks up more than 2 percent, amid reports the U.S. government might take a larger stake in troubled banking giant Citigroup to ease the financial crisis.

Worries that major Western banks, crippled by growing losses from bad assets, might have to be nationalized sent markets sharply lower last week.

But investors seemed relieved to have some clarity about the fate of Citigroup after the Wall Street Journal, citing people familiar with the situation, said late Sunday that Citigroup Inc. is negotiating with authorities to increase the U.S. government's stake in the teetering lender to as much as 40 percent.

Executives would prefer to keep the government's stake closer to 25 percent, according to the Journal, which reported Citigroup made the proposal to regulators.

So far, President Barack Obama's financial rescue plans have met a lukewarm reception. But analysts say such a move could help restore confidence by finally bring a measure of stability to the hard hit financial sector, further boosting the chances for an economic recovery.

"People are taking it as a positive sign," said Francis Lun, general manager of Fulbright Securities Ltd. "It shows the government will not allow a major bank to fail again. They've learned their lesson with Lehman Brothers that the ramifications are so great, sometimes no amount of money can rebuild confidence."

Hong Kong's Hang Seng rose 291.26, or 2.3 percent, to 12,990.43 and South Korea's Kospi was up 25.39, or 2.4 percent, at 1091.22.

In mainland China, the Shanghai benchmark added 0.4 percent. Markets in Taiwan and the Philippines also edged higher.

In Japan, the Nikkei 225 stock average lost 29.12 points, 0.4 percent, to 7,387.26 as the yen strengthened against the dollar, thought recouped some its losses. Australian shares also fell.

U.S. futures were higher on the Citigroup report, suggesting Wall Street would recover at the open. Dow futures rose 67 points, or 0.9 percent, to 7,419 and S&P500 futures were up 7.8 points, or 1 percent, at 777.30.

Last Friday, continuing financial and economic worries sent the Dow Industrials down 100.28 points, or 1.3 percent, to 7,365.67 On Thursday, the Dow broke through its Nov. 20 low of 7,552.29, and closed at its lowest level since Oct. 9, 2002.

The Standard & Poor's 500 index on Friday fell 8.89, or 1.14 percent, to 770.05.

Oil prices were steady in Asian trade, with light, sweet crude for April delivery up 35 cents at $40.38 barrel. The contract edged down 15 cents to settle at $40.03 Friday.

In currencies, the dollar fell to 92.85 yen from 93.32 yen, while the euro strengthened to $1.2913 from $1.2825.

Is it just me, or should we all apply for a bailout?

Is it just me, or should we all apply for a bailout?

Every time I read, listen, or watch the news, the US government is bailing out someone and giving away more and more money.

When does it stop?

The U.S. Government is convinced it can spend its way out of this mess. This is same mess we spent our way into, so how could we possibly get out of it by spending even more money?  I can't see the logic in that.

Here we are again, giving more and more money to Citi (NYSE_C) and Bank of America (NYSE_BAC). Didn't BAC just buy Merril Lynch and Countrywide ... and now they need even more money just to keep going.

Here's my take: rather than spend all this money (and we're talking trillions of dollars at this point), why not give all the small-businesses in America a serious tax break. Small businesses produce 80% of all the jobs in this country. Small businesses do a far better job and have a vested interest in getting it right. I am not so sure the Government has the same vested interest. Does anyone know for sure what happened to the first 350 billion dollars of the TARP money?

So, if we cut taxes for small business they will have more capital to invest, increase employment numbers and can become competitive again. I would also do away with capital gains. If we cut corporate taxes for small businesses and eliminate the capital gains tax, we could certainly slow down and turn this freight train back to more confident times.

What's also amazing to me is that we have the same players in charge, just in different uniforms. With all this talk about change and the need for experienced people, it may be possible that this is not the answer. Just look at what experienced people have gotten us into in the first place. We need some new ideas from people who have common sense and know that two and two is four.

I would really like to get your views on what you think could be a solution for the US economy. If you want to leave a comment, you're more than welcome to do so. We ask only one thing, that comments are not obscene or threatening to anyone.

Many people have drawn a parallel between the current economy and to the crash of 1929. I have been doing some research and I found that the crash of '29 lasted a little over 34 months. When the stock market reached its high on September 3, 1929, it basically went straight down with some minor rallies, but eventually put in its ultimate low on July 8, of 1932. That was 34 months later. If you think of the recent high in the stock market being on September 9, 2007, and you look at a bear market period of 30 to 34 months then you are looking at an absolute bottom in the stock market some time in 2010 and not 2009.

Trust, confidence, hope for the future: these are all the elements that are needed to drive the stock markets of the world higher. I believe that President-elect, Obama's job is an impossible task. Expectations for this President are way beyond belief. He may (or may not) fall short on promised solutions for all the economic and other challenges we face in the future. Only time will tell.

I think that the stock market is going to remain in a decidedly negative tone and expect that short-term rallies will be met with selling pressure. All of the old ways of valuing stocks through earnings, dividends, sales and so forth can be thrown out of the window for the next year and a half. What we're trading now is simply fear, frustration, and the destruction of value.

Let me know your comments.

Adam Hewison
Co-creator, MarketClub