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The IMF unleashed a heat-seeking missile on global markets with statements that "The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s,” and “The situation is exceptionally uncertain and subject to considerable downside risks.”

This opinion was tempered somewhat by the IMF chief economist’s optimism that the world would avoid a repeat of the Great Depression of the 1930s,  based on an expectation that governments would follow the right policies. European governments were having difficulty in coordinating their response to the crisis and more action was needed to shore up their shaky financial systems, he said.

Emerging market economies have seen sharp falls in asset prices this week and overall are down about 60% so far this year. The IMF noted that they have yet to bear the brunt of the slowdown in the real economy and would fare somewhat better than developed countries.

The projection for Chinese growth next year was cut by half a percentage point to a still-healthy 9.3%, and India was forecast to grow at 6.9%. Charles Collyns, the deputy director of the IMF’s research department, said that India, being less open an economy than China and many of the industrialized economies, had strong internal drivers of growth which should shield it from the worst of the economic downturn.

And Adam Schrek of the AP reports that an ASEAN joint statement said that the 10-nation bloc's economic fundamentals remain sound even though gross domestic product growth might not match last year's 6.7 percent.

"ASEAN today is lean and fit, in part reflective of the significant reforms undertaken over the decade since the 1997 financial crisis," the group said. Ministers said banks in the region should be able to withstand the financial turmoil shaking the world's banking system.

They said the region's banks have no shortage of capital, do not carry particularly large debt loads, and have limited exposure to the sort of toxic mortgage loans and other bad assets that have brought down banks in the U.S. and Europe.

"Our banks are strong," said Tan Sri Nor Mohamed Yakcop, Malaysia's finance minister. "We don't have a banking crisis, period."

We will see, but there is no doubt that investor risk appetite has declined significantly - at least for now.

Source: Emerging Asia Hangs On