The Ceylon News

Jan. 20 (Bloomberg) -- Asian stocks and U.S. futures slumped after the U.K. was forced to widen a rescue of the banking industry, sparking concern that the cost of bailouts will grow as the global recession deepens.

HSBC Holdings Plc, Europe’s largest bank, lost 7.7 percent in Hong Kong amid speculation the U.K. will take full control of Royal Bank of Scotland Group Plc after the lender forecast the biggest loss in British history. BHP Billiton Ltd., the world’s largest mining company, dropped 4.7 percent in Sydney after oil and aluminum prices fell. Elpida Memory Inc. tumbled 5 percent in Tokyo after postponing its earnings announcement.

“Market jitters remain as banks’ asset quality worsens in slowing economies,” said Kim Young Il, head of equities at Korea Investment Trust Management Co. in Seoul, which manages the equivalent of $6.2 billion. “The attention is now on whether this signals a second round in the financial crisis.”

The MSCI Asia Pacific Index dropped 2.3 percent to 83.11 as of 7:25 p.m. in Tokyo, with five of its members falling for each that advanced. Japan’s Nikkei 225 Stock Average lost 2.3 percent, while Hong Kong’s Hang Seng Index dropped 2.9 percent. All markets declined except China and Sri Lanka.

Europe’s Dow Jones Stoxx 600 Index slid 1.7 percent yesterday, led by RBS after it forecast a loss of as much as 28 billion pounds ($40 billion) this year.

Hankook Tire Co., South Korea’s biggest tire maker, fell the most in seven weeks today after reporting a quarterly loss. Foxconn International Holdings Ltd. slumped 7.3 percent in Hong Kong, while Contact Energy Ltd. tumbled 9.4 percent in New Zealand after forecasting lower profits.

Financial Crisis

Futures on the Standard & Poor’s 500 Index fell 0.8 percent, pointing to declines when U.S. markets reopen following a holiday yesterday. The S&P 500 is off to its second-worst start to a year, with analysts predicting a 28 percent drop in fourth- quarter profits, according to data compiled by Bloomberg.

Barack Obama’s inauguration later today as the 44th president of the U.S. will likely be a focus for traders as he assumes control of an economy struggling to cope with the worst financial crisis since the Great Depression.

The turmoil has dragged the world’s largest economies into recession, caused more than $1 trillion of losses at financial institutions and prompted a sell-off in global stock markets.

MSCI’s Asian gauge slumped 43 percent in 2008, its worst year on record, and is down 7.3 percent this year, as demand for the region’s raw materials, automobiles and computers declines. The average valuation of the measure’s constituents has fallen about two-fifths in the past year to 10 times reported profit.

‘Economic Pearl Harbor’

In more signs today that the slowdown is deepening, Japan’s Cabinet Office said consumers became the most pessimistic since records began, while a Chinese government spokesman said official urban unemployment may climb to an almost 30-year high.

“We are in the middle of the economic Pearl Harbor right now,” billionaire investor and Berkshire Hathaway Inc. Chairman Warren Buffett told NBC in an interview aired on Jan. 18. “Now we have to get mobilized to win the war.”

HSBC slumped 7.7 percent to HK$57.50 even after saying it couldn’t “envisage circumstances” where it would need government funding. Mizuho Financial Group Inc., Japan’s second- largest bank by revenue, fell 6.2 percent to 228 yen. PT Bank Danamon Indonesia tumbled 12 percent to 2,575 rupiah, the biggest decline on MSCI’s Asian gauge.

RBS shares plunged 67 percent yesterday as the U.K. agreed to swap preference shares it holds in the lender for ordinary stock. In exchange for government guarantees on losses from toxic debt, RBS will have to sign a binding agreement with the Treasury on how much it will lend and on what terms.

‘Fragile Sentiment’

The cost of protecting investors in corporate bonds from default rose on concern the banking crisis is worsening. The Markit iTraxx Australia index was quoted 5 basis points higher at 310, Australia & New Zealand Banking Group Ltd. prices show. The Markit iTraxx Japan index added 2.5 basis points to 297.5, according to Barclays Capital prices.

“The RBS forecast has hit already fragile sentiment,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. “It brings back all the doubts about more writedowns. If you can’t get stabilization in the credit markets, it’s hard to get any traction in economic activity.”

BHP slumped 4.7 percent to A$28.95. Alumina Ltd., a partner in the world’s biggest producer of the material used to make aluminum, lost 4.2 percent to A$1.255. Alumina may report a loss this year and cut its dividend because of lower forecast prices of the metal, according to ABN Amro Holding NV.

Crude oil for February delivery in New York dropped 6.3 percent to $34.20 a barrel in after-hours trading. Aluminum in London lost as much as 3.9 percent yesterday to the lowest level since September 2003.

Declining Profits

Speculation that corporate profits may decline further dragged stocks lower. Elpida lost 5 percent to 533 yen, after delaying its profit announcement by more than a week to Feb. 6, as it finalizes an affiliate’s earnings.

Hankook tumbled 9 percent to 12,100 won in Seoul, the biggest decline since Dec. 2 after reporting a fourth-quarter loss of 46.7 billion won ($34 million). Foxconn, the world’s No.1 contract maker of mobile phones, fell 7.3 percent to HK$2.79 after saying 2008 profit will drop.

Contact Energy, New Zealand’s biggest publicly traded power generator, plunged 9.4 percent to NZ$6.66 after saying full-year profit may plunge on rising gas costs. Australia’s Origin Energy Ltd., Contact Energy’s biggest shareholder, dipped 5.3 percent to A$14.38 in Sydney.

Another Sri Lankan newspaper editor was attacked this morning while driving to work near Colombo, the capital, just over two weeks after the murder of Lasantha Wickrematunge, editor of the Sunday Leader newspaper.

Upali Tennakoon, chief editor of the Rivira weekly, was driving on the outskirts of Colombo with his wife when two men on motorbikes pulled up in front of his car and told him to get out, according to a reporter on the paper.

When he refused, they smashed the car window and attacked him and his wife with wooden clubs and a knife, Stanley Samarasinghe, a senior journalist at Rivira, told The Times.

The two assailants escaped on their motorbikes and Mr Tennakoon and his wife were taken to hospital, where they are in a stable condition, Mr Samarasinghe said.

It was the latest in a series of attacks on Sri Lankan journalists, many of them fatal, since the government launched a military campaign to defeat the Tamil Tiger rebels after a ceasefire unravelled in 2006.

Most, including Wickrematunge's murder, have been blamed on the government, which has failed properly to investigate many of the attacks despite repeated requests from the international community.

Wickrematunge, one of the government's most outspoken critics, was also attacked by unidentified men on motorbikes, who shot him in the head while he was driving to work in Colombo on January 8.

Three days after his death, his newspaper published what it said was a self-written obituary in which he accused the government of assassinating him because of his criticism of its military campaign against the Tigers.

Two days before his death, unidentified gunmen had also attacked and partially destroyed the headquarters of MTV, a private television station that had been criticised in state media for its coverage of the campaign.

However, Mr Samarsinghe said it was unclear who was behind this morning's attack as Mr Tennakoon had not been especially critical of the government or its opponents.

"Lasantha's attack, you can speculate that it came from the government side, because he was very critical of the government," he said.

"But Mr Tennakoon ran his paper in a very impartial way. We are neither pro-government or pro-opposition."

Whoever was responsible, the attack will only exacerbate the climate of fear that pervades Sri Lanka's once vibrant media industry, with many top journalists already in hiding or sheltering overseas.

The New York-based Committee to Protect Journalists (CPJ) has asked foreign diplomats in Colombo to "weigh in forcefully and immediately" with President Mahinda Rajapaksa to put an end to such attacks.

But diplomats in Colombo say they have little influence over the President and his powerful brother, Gotabaya Rajapaksa, who is the Defence Secretary.

Human Rights Watch, the New York-based rights group, wrote an open letter to President Rajapaksa today asking him to drop all charges against journalists held on politically motivated charges.

J.S. Tissainayagam, a journalist, and N. Jashiharan, a publisher, and his wife, V. Valamathy, have been in detention since March 2008, it said.

The letter identified serious violations of due process and the right to a fair trial by the authorities.

"Tissainayagam's arrest was politically motivated and his detention has involved a litany of due process violations," said Brad Adams, Asia director at Human Rights Watch.

"The prosecution of journalists only reinforces the impression that the government has embarked on a systematic campaign to smother free media."

Sri Lanka accused the rebel Liberation Tigers of Tamil Eelam of using civilians as “cannon fodder” in the north as Tamils said army shelling killed more than 70 people in the past three days.

“The terrorist outfit is using the thousands entrapped as cannon fodder in its attempt to stall the multifrontal military advance,” the Defense Ministry said on its Web site yesterday.

At least 66 civilians were killed in army artillery and rocket attacks in recent days, the TamilNet news agency in the north reported, citing T. Varatharajah, the regional director of the Mullaitivu district health service. In a separate incident, an army shell struck a makeshift hospital yesterday, killing five people, he said.

Sri Lanka’s military says it has driven the Tamil Tigers into a 400-square kilometer (155-square mile) area in the northeast as it tries to end the 26-year civil war. Defense analysts say LTTE fighters will now pursue their fight for a separate homeland by using guerrilla warfare in the jungles in the north.

“LTTE terrorists have reportedly drawn artillery batteries, heavy mortars and satellite bases inside civilian settlements and makeshift camps that were earlier declared as no-fire zones,” the Defense Ministry said. The rebels are attempting to create a civilian crisis in Wanni district, it said.

UN Protest

The United Nations said yesterday the Tamil Tigers refused to allow UN workers traveling with an aid convey to Wanni to return from the north.

“The UN calls on the LTTE to meet their responsibilities and immediately permit all UN staff and dependents to freely move from this area,” the Office of the UN Resident Humanitarian Coordinator said in a statement issued in the capital, Colombo.

The UN two days ago called on the government to ensure the safety of civilians and appealed to the LTTE to allow children and families to leave conflict zones and to release child soldiers.

Clashes in the past three weeks have displaced tens of thousands of civilians inside the conflict zones, the International Committee of the Red Cross said this week.

The government said Jan. 21 it expanded a safe zone for civilians in the north. As many as 200,000 civilians are trapped in the conflict zone, Dharmalingham Sidharthan, leader of the People’s Liberation Organization of Tamil Eelam, said earlier this week in a telephone interview from Colombo.

Army Advance

The military estimates the LTTE has only about 1,000 fighters left after its political headquarters at Kilinochchi was captured Jan. 2 and is targeting the jungle bases of the group’s commanders, including its leader Velupillai Prabhakaran.

Police in Malaysia are on a nationwide alert after reports that Prabhakaran may have fled to the country, the New Straits Times newspaper said on its Web site yesterday.

Soldiers two days ago captured an LTTE base equipped with underground bunkers, an auditorium and a communications room, the Media Centre for National Security said in a statement. Troops recovered maps of Sri Lanka and other documents that gave “all the deployments up to the brigade level of the Sri Lankan army,” according to the statement.

Tamils made up 11.9 percent of Sri Lanka’s population of 20 million in 2001 and the Sinhalese almost 74 percent, according to a census that year. The LTTE says Tamils are discriminated against by the Sinhalese.

Recent coverage of the war has increased tension in the media

The editor of a Sri Lankan weekly newspaper and his wife have been assaulted in Colombo in the latest of a series of attacks on journalists.

Reporters on the Rivira magazine say four men on motorcycles blocked Upali Tennakoon's car and attacked the couple with iron rods and knives.

The pair are in a stable condition. The attack comes two weeks after top editor Lasantha Wickramatunga was shot dead.

Meanwhile, fierce fighting continues as troops battle rebels in the north-east.

Media rights groups say journalists are regularly subjected to intimidation and violence in Sri Lanka.

Crossfire

Doctors said Mr Tennakoon was treated for cuts to his hands and forehead. His wife also suffered cuts.

The wounds were said to be minor and the pair will make a full recovery, the doctors said.

Two weeks ago Mr Wickramatunga, editor of the Sunday Leader newspaper and a leading critic of the government, was shot in the head by unknown killers in Colombo.

An article said to be self-penned and published in his paper after his death blamed the government.

The government has accused the opposition of trying to gain political advantage from the murder.

Amnesty International said in November that at least 10 media employees had been killed in Sri Lanka since 2006.

Some reporters say the intimidation has got worse as the war has intensified with the Tamil Tigers.

In the latest fighting, pro-rebel websites say the Tigers have beaten back an army offensive in Mullaitivu, killing at least 40 soldiers.

A military spokesperson denied the rebel claim.

There have been no independent reports from the front lines, and it is impossible to verify either side's account.

The International Committee of the Red Cross said it had handed over to the Tamil Tiger rebels the bodies of 11 of their fighters.

The ICRC acts as an intermediary and facilitates the exchange of bodies between the two sides.

Meanwhile, the most senior government official in Mullaitivu district, Imelda Sukumar, has told the BBC that nearly 100 civilians have been killed in the crossfire between the military and rebels since the weekend.

The rebels have been battling for more than a quarter of century for a separate state for the Tamil minority.

An estimated 230,000 civilians are reported to be trapped in the conflict zone [GALLO/GETTY At least 67 civilians have been killed as Sri Lankan government troops push further into rebel Tamil Tiger territory, according to local health workers. Doctors claim around 30 people were killed on Thursday alone, after soldiers shelled a village and makeshift hospital in a government-declared "safe zone" on the edge of rebel-held territory in the north of the island. Kandasamy Tharmakulasingham, a local health official, said that shells hit a school doubling as a hospital on Thursday, one day after the government dropped leaflets across the area assuring civilians they were safe from attack. Tharmakulasingham described the attack as so severe that health workers had difficulty establishing a death count because so many of the bodies were dismembered. Dr Thurairaja Varatharaja, the district's top health official, told news agency AP that the bodies of at least 30 people killed in the shelling, including five hospital patients, were brought to the mortuary. Ongoing shelling He said another 117 people, including 66 women and children, were injured in the attack. "There are a lot of bodies elsewhere, but they have not collected those bodies," he said, adding that the ongoing shelling was coming from the government-controlled area around the town of Oddusuddan. Varatharaja said another 37 people were killed in the fighting on Tuesday and Wednesday. However, Brigadier Udaya Nanayakkara, a spokesman for the Sri Lankan military, denied hitting the makeshift hospital or a civilian village. "We have demarcated the safety zone and we didn't fire into that area," he said. It is impossible to verify death tolls or battle accounts as journalists are barred from the conflict zone by both the government and rebel fighters. Separately, the United Nations in Sri Lanka accused the separatists of violating international armed conflict laws by refusing to allow local UN staff and their families to leave the war zone. "The Liberation Tigers of Tamil Eelam (LTTE) denial of safe passage is a clear abrogation of their obligations under international humanitarian law," the UN said in a statement published on Thursday. LTTE officials could not be contacted for a response to the UN statement. The LTTE is now surrounded by government troops and cornered in an area that measures less than 400sq km in northern Sri Lanka. Civilians trapped Aid agencies say about 230,000 civilians are trapped between the advancing government troops and LTTE fighters. Video Sri Lankan army claims gains against Tigers Emelda Sukumar, a district government agent in the region, said civilians were "unable to escape from the shelling" because "when people occupy particular places, the LTTE sends shells from that area, and then the army also targets the same area. Sukumar is paid by the government to oversee official functions in the region - including the distribution of humanitarian aid. However, she is under LTTE protection and the government has said its agents in rebel territory are under duress to give a version of events that puts the LTTE in a favourable light. Tony Birtley, Al Jazeera's correspondent in the Sri Lankan capital Colombo, said rebel fighters were struggling to hold on to their last stronghold around the town of Mullaittivu as the army appeared to gain ground every day. "Critics are concerned there's no longer talk of a political solution and that the grievances that caused this terrible conflict ... have not been fully addressed" Tony Birtley, Al Jazeera correspondent, Colombo "The Sri Lankan government is proudly saying it will be the first time terrorism has been defeated by force," he said. The LTTE says it is fighting for a separate state for the minority Tamil population, many of whom complain of discrimination under successive ethnic Sinhalese governments since the island gained its independence from Britain in 1948. However, there are concerns that the government might step back from its promise to follow-up military action against the Tigers with political reforms. "Critics are concerned that there's no longer talk of a political solution and that the grievances that caused this terrible conflict more than 20 years ago have still not been fully addressed," Birtley said.