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Kim Jong Il’s death sinks Asian markets

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Asia was supposed to be a bright spot for a global economy shaken by the financial troubles of the West.

But the death of North Korean leader Kim Jong Il is a reminder of how unreliable that assumption may be.

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Kim’s death raises a massive geopolitical question about the stability of a region deeply intertwined with the U.S. economically and militarily. Investors in Asia reacted accordingly Monday, sinking markets from Japan to Australia.

Seoul’s Kospi recovered slightly from a 4.9% freefall in the morning to close down 3.4%. Tokyo’s Nikkei stock average fell 1.3%, Hong Kong’s Hang Seng declined 1.2%, and the Shanghai Composite lost 0.3%.

Other markets seeing a decline in shares included Taiwan, Singapore, Indonesia and New Zealand.

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‘Markets hate uncertainty, and Kim Jong Il’s death adds uncertainty to an already uneasy global economy,’ Keith Ducker, a San Francisco-based chief investment officer at technology operator TORA, told MarketWatch. ‘Instability in North Korea leadership would clearly be a negative for Asia investment.”

The news of Kim’s death comes at a time when Japan’s economy is still riddled with uncertainty following its March earthquake, tsunami and nuclear crisis. The country’s economy grew slower than expected in the third quarter and faces a steep decline in exports to Europe.

China, the world’s second-largest economy, is just as vulnerable in terms of exports, but complicating Beijing’s situation is how to rein in a property bubble without derailing economic growth.

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Three months of declining national housing prices has made investors worried that the central government will tighten monetary policy too much. Stubbornly high inflation means a repeat of the post-2008 financial crisis stimulus plan is unlikely -- sharpening the view that the Chinese economy is beginning a long-term slowdown.

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-- David Pierson in Beijing

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