Nervous week for Asia traders

It was a tense week for traders in the Asia Pacific region. As CNN's Eunice Yoon reports, all eyes are on the U.S.

It was a head-pounding, nerve-racking week in Asian markets as fears of a US recession triggered a stock market meltdown.

This is a real crisis of confidence.

Investors have been hoping Asia could weather a US slowdown. With many of the economies here booming people argue the region’s growth is decoupling from the US. And Asia's rising middle-class could help cushion a global slump. But this week’s sell-off shattered that theory.

I think that's, er, you know, today is the end of the decoupling story. And people are gonna look at the US and say it's the end driver of global demand. Without the US, and Asia has to slow.

Asia sells much of its goods to America. Paniced investors unloaded exporters and other stocks, driving markets like Tokyo, Seoul, Taiwan and Hong Kong to some of their biggest declines in years. Financial shares also tanked as investors worried the credit crisis in the US could spill over into the global banking system including China’s. The Bank Of China has the biggest exposure to American sub-prime related securities of any Chinese lender.

Bank Of China will probably report a 30% decline in 2007 profit if they were to make sufficient provision. They have to bear down and cut some costs, and maybe sell some assets to make up for the shortfall.

The panic selling forced the US Federal Reserve to take a dramatic emergency step, its deepest interest rate cut in 23 years.

Hong Kong’s markets saw some of the wildest swings. After the Fed’s move the monetary authorities here followed suit by cutting interest rates of 0.75%. That helped to restore optimism to this market.

The Fed’s rate cut helped calm investors for now, but most expect tomorrow volatility ahead and are watching the US to see what comes next.

Eunice Yoon , CNN, Hong Kong.

Notes:

Nerve-racking: Intensely distressing or irritating to the nerves

Decoupling: In physics, decoupling is the general phenomenon in which the interactions between some physical objects (such as elementary particles) disappear.