Asia Stocks Fall Amid Skepticism Over US Bank Plan

An investor looks at the electronic stock price board at a private securities company Tuesday Feb....

An investor looks at the electronic stock price board at a private securities company Tuesday Feb. 10, 2009 in Shanghai, China. Shanghai's key index _ which had surged about 12 percent over the last six trading days _ rebounded from the red to close 1.8 percent higher as figures showed the country's inflation eased to just 1 percent in January. That's seen as giving Beijing more leeway to carry out its own economic stimulus plan without igniting new price rises. (AP Photo/Eugene Hoshiko)

(AP)

Asian stock markets dropped Wednesday, following a steep sell-off on Wall Street overnight, as investors reacted with skepticism to the U.S. government's latest plan to rescue the ailing financial industry with as much as $2 trillion in commitments.

As in the U.S., many questioned whether the revamped bailout program, unveiled Tuesday by U.S. Treasury Secretary Timothy Geithner, would be enough to absorb the bad assets saddling bank balance sheets and free up the credit markets that govern lending to consumers and businesses.

Geithner said the plan to get trillions of dollars in financing flowing through the world's largest economy was urgently needed as part of the government's effort to stave off "catastrophic failure" of institutions. A key plank involves the government teaming with the private sector to buy up to $1 trillion in souring assets from financial firms. A separate lending program would be expanded to as much as $1 trillion from $200 billion for consumers and businesses.

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Investors, however, complained about what they viewed as a lack of detail.

Garry Evans, a chief Asian equity strategist with HSBC in Hong Kong, called the plan "muddled." He said the government was skirting around what many investors have already concluded: that the U.S. may have to nationalize the banks for a period.

"People are not convinced that this plan is what it is needed," Evans said.

"They (U.S. officials) have still philosophically backed away from the ultimate conclusion, which is the government will have to take over financial institutions," he added. "Philosophically that's quite hard for the U.S. government to admit, but the history of banking crises shows that is what governments usually do."

Hong Kong's Hang Seng Index tumbled 416.15 points, or 3 percent, to 13,464.49, while South Korea's Kospi lost 16.32 points, or 1.4 percent, to 1,182.35. Japanese markets were closed for a public holiday.

In mainland China, Shanghai's main stock measure lost 0.6 percent to 2,252.41.