The fallout from the collapse of Lehman Brothers caused panicked selling of banking shares on Tuesday throughout Asia, where many of the failed American company’s biggest creditors are based. Even as analysts and bankers said the effects of Lehman’s failure on Asian financial markets would be limited, the 158 year old investment bank closed operations in three of their Asian subsidiaries - Lehman Brothers Asia, Lehman Brothers Securities Asia and Lehman Brothers Futures Asia. The investment bank also ceased trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, but its asset management company, Lehman Brothers Asset Management is expected to continue operations as usual.

The banks largest exposure in Asia was undoubtedly in Japan where it had outstanding loans worth US$1.6 billion from seven Japanese banks, including Aozora Bank in Tokyo, to which it owed US$463 million. Lehman also said it owed US$289 million to Mizuho Corporate and US$231 million to Shinsei. It also identified another half-dozen banks based elsewhere in Asia, including the Bank of China and a unit of Citigroup based in Hong Kong. (more…)

Our sister website, China Briefing, has been running an excellent series over the past few months on China’s relations with its neighbors. While many concentrate on action within Asian nations themselves, there is little commentary about who is influencing who, and where border trade is developing.

The past week has seen two threads go up on that site concerning India and Pakistan which should be of great interest to 2point6billion readers. Links to them and to the complete series are listed below. Enjoy.

Rivals and Partners: India and China Look Forward

China and Pakistan’s Enduring Alliance

Complete Series

Asia’s growth tigers are mellowing down according to the revised statistics on the regions growing economies released by the Asian Development Bank. According to the bank, The slowdown in the U.S. economy is now gradually impacting Asia’s developing nations which are expected to grow at 7.5 percent this year, the slowest growth in the region since 2003. The ADB also slashed the 2009 growth forecast to 7.2 percent from the previous 7.8 percent as it said the global slowdown, high inflation and tight monetary policy would cut back on expansion.

Reuters quoted the report - “If the sub-prime crisis worsens significantly, Asia is bound to suffer much more serious financial effects, including an abrupt reversal of the capital inflows that have held up well so far.” Experts also believe that the decline of the U.S. economy, could change global war politics and influence trade thereby slowing the rapid pace of globalisation we have witnessed in the least few years.

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Financial institutions, stock markets  and governments across Asia have applauded the U.S.  government takeover of Fannie Mae and Freddie Mac, a move that came after several central banks in the region expressed growing alarm over the future of their vast investments in the two ailing mortgage lenders.

Japan, South Korea and China were the worst hit Asian economies when the real estate mortgage lending firms declared their losses earlier this summer. The Washington Post said Asian investors, led by central and commercial banks in China, Japan and South Korea, are among the largest holders of Fannie Mae’s and Freddie Mac’s mortgage-related debt, the value of which has now effectively been guaranteed by the U.S. government.

The takeover sent markets from Taipei to Tokyo jumping on Monday and calmed what had been growing concerns of investor flight in South Korea. The key stock index in Tokyo jumped 3.4 percent on Monday. Hong Kong’s jumped 4.3 percent, Seoul’s 5.2 percent, and Taiwan’s 5.6 percent.

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Asia is booming and there are hard facts to prove it. According to the Forbes report on Asia’s youngest billionaires,  the region is home to the world’s fastest growing population of the wealthy. According to the World Wealth Report, the population of China’s millionaires jumped 20 percent last year. The billionaire population grew even faster. The March Forbes‘ list included 42 Chinese billionaires, up from 20 the previous year. Keeping pace are Indian millionaires who’s presence jumped 23 percent last year. The billionaire count soared to 53 from 36 the previous year.

Also worthy of note, is that India’s four riches billionaires worth a gross of US$180 billion together are worth more than China’s 40 wealthiest individuals. Nonethless, the rich are growing richer faster in China than in India - China’s richest person, Yan Huiyan, is worth US$16.2 billion, seven times the net worth of last year’s No. 1, Wong Kwong Yu.

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Is it the deadly combination of a failed economics and politics that’s tarnishing Shining Asia’s rise to the top?

Coups, protests and resignations have been the flavor of the past month in Asia, which has seen uprisings spread across the region, from Pakistan to Japan. The potent combination of a rudderless society crippled with inflation woes, and plummeting stock markets has suddenly left Asia in limbo.

Stocks fell around the world Monday, led by Asian exchanges as concerns about a slowing global economy weighed heavily on the markets, AP reported. Adding to the crisis, were analysts who expect further near-term volatility and are warning foreign investors to stay away until the year-end.

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Man has a strange connection with trains, as parents reminisce in the pleasure of days spent watching the countryside whiz by, children remain transfixed at the speed and convenience of modern trains.

Today, as oil soars to above US$117 a barrel, and the cost of transporting goods across the world rises, Asian countries are re-investing in the railways. A recent report by Roland Berger consultants on behalf of Unife, the European railway industry association, says that the high speed train sector in Asia has grown 9 percent annually.

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As oil prices show no signs of declining and transportation of goods becomes costlier, Asia is looking ahead. The region is strategically strengthening trade ties with its neighbors in order to improve the Asian economy. Boosting trade and tourism ties, the bloc of South East Asian countries also plans on raising funds to build missing links to a railway system from Singapore to Kunming in Southern China, connecting eight Asian countries by 2010

On Thursday, ASEAN also finalized free trade agreements with India and its Pacific neighbors Australia and New Zealand, creating a common market of 1.7 billion consumers, cutting across some of the world’s fastest growing economies. The deal will be formalized by Prime Minister Manmohan Singh in Bangkok this December and will be effective from January 2009. It will allow seamless and duty-free movement of goods across territories. India and China are also expected to sign trade agreements with each other that will boost economic synergies between them in December.

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Its the Asian century for sure, but how much of Asia is actually impacting the world? Does Asia have the strength to stop America from sinking into a recession? According to a Xinhua News Agency story, Asia’s super charged growth is preventing America from drowning in depression.

“We are experiencing the first episode in history of reverse coupling, in which the rest of the world pulls the U.S. forward rather than the opposite,” said Fred Bergsten, director of the Peterson Institute for International Economics, a leading think tank in the United States.

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Chinese President Hu Jintao will visit South Korea, Tajikistan and Turkmenistan on a three nation tour starting today to boost bilateral ties, strengthen its borders and gain prominence in Central Asia, a region being viewed by everyone interested in energy security.

The Chinese leader who will meet ROK President Lee Myung-bak, house speaker and prime minister today, is expected to sign a number of cooperation deals on energy saving, technology, economics, trade, education and the 2010 World Expo in Shanghai.

China Daily reported that President Hu will leave Seoul tomorrow for Dushanbe, capital of Tajikistan, where he will attend the summit of the Shanghai Cooperation Organization (SCO), the mutual security group including China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

The Chinese leader will visit Turkmenistan in the last leg of his tour. (more…)