Asia urges action on US bailout as shares plunge

Asia was shaken Tuesday by the collapse of the U.S. financial bailout effort, with the region's political leaders expressing hopes for a quick solution and Japan's central bank injecting more cash into money markets to promote liquidity and lending.

"This is a bad development," Australian Prime Minister Kevin Rudd said of the U.S. House of Representatives' rejection Monday of a $700 billion plan to rescue ailing financial companies burdened with piles of bad mortgage-related debts.

"The outcome has caused a major impact not only the U.S. economy but also the world economy," said Japan's Economy and Fiscal Policy Minister Kaoru Yosano, urging Washington to renegotiate a workable package.

The bailout plan, defeated by a vote of 228-205, is aimed at preventing a possible collapse in the U.S. financial system, which would have dramatic repercussions for Asia and the entire global economy.

While few Asian financial companies have been hurt badly by the credit crisis, the fallout could spread, and a recession in the U.S. would batter Asia's export-oriented economies.

Jitters about the crisis were evident last week in Hong Kong when hundreds of customers descended on branches of Bank of East Asia to withdraw money amid rumors spread by cell phone text messages that questioned the bank's stability. The bank and authorities called the rumors baseless, and the bank run subsided after a day or two.

The Bank of Japan pumped another 3 trillion yen ($28.7 billion) into money markets Tuesday as part of the coordinated effort of the world's central banks to boost liquidity and lending. Since the collapse of U.S. brokerage Lehman Brothers earlier this month, Japan's central bank has injected 21 trillion yen ($200 billion) into markets.

News of the bailout rejection sent many Asian stock markets plunging, although some recovered by the end of trading. Japan's Nikkei 225 sank more than 4 percent, but Hong Kong's key index reversed its early slide to close 0.8 percent higher.

In New York Monday, the Dow Jones industrial average slid 777 points, or nearly 7 percent, to 10,365.45. In Washington, meanwhile, congressional leaders and officials scrambled to restructure the bailout proposal so that it would attract the support needed to pass.

In Thailand, where the stock market's key index was 0.6 percent lower after sinking sharply earlier, Prime Minister Somchai Wongsawat urged investors to stay calm.

"The impact of the global financial turmoil on our economy will be limited," he said. "We can still cope with the situation but we have to warn investors not to be alarmed."

Hong Kong's de facto central bank called for calm while highlighting the gravity of the situation.

"When the rescue plan remains uncertain, finances of financial institutions also remain doubtful," said Joseph Yam, chief executive of the Hong Kong Monetary Authority, adding that the authority would inject liquidity into the markets if necessary.

Philippine President Gloria Macapagal Arroyo expressed hopes for another vote soon in the U.S. House to allow the bailout to pass.

"That just goes to show that this is really a time of global economic uncertainty," she said. "I know that these global forces are causing real difficulties for countries around the world so we in the Philippines have been working hard on all fronts."

Her nation is trying to control inflation and help people hit by the global financial woes, she said.

Chinese financial markets were closed for the week for national holidays and so the central bank made no official comment.