Economic ‘global contagion’ strikes Asia
Wed, October 01 2008
The benchmark Nikkei 225 Stock Average fell 483.75 points, or 4.12 per cent, to close at 11,259.86.
The broader Topix index of all first-section issues fell 40.46 points, or 3.59 percent, to 1,087.41.
After a proposed $700-billion rescue package for Wall Street banks was defeated in the U.S. Congress, the blue-chip Dow Jones Industrial Average dropped 7 per cent by the close of trading Monday, shedding 777.68 points, its largest point-drop in history.
Hong Kong’s Hang Seng Index followed suit, falling below 17,000 in the first hour of trading. Shares plunged more than 6 per cent in the first 10 minutes of trading in response to news of the defeat of the bail-out plan in Washington.
But it recovered ground to close the morning down 433 points, or 2.42 per cent, at 17,447.66.
Hong Kong share prices have been in a prolonged decline since last October when they peaked at almost 32,000.
The Taiwan stock market dropped 400 points, nearly 4 per cent, after opening at 9 a.m., despite the government unveiling an emergency plan to stabilize the bourse earlier Tuesday.
At one point it plunged 6.5 per cent, but closed at 5,719.28, down 210.35 points, or 3.55 per cent.
Shares edged down on the Seoul stock exchange. The Kospi fell 8.30 points, or 0.57 per cent, to close at 1,448.06.
But the Shanghai and Shenzhen markets bucked the regional trend, with shares ending sharply higher.
The Shanghai Composite gained 3.6 per cent to 2,297.50, while the Shenzhen All Share index climbed 3.2 per cent to 607.79.
Thai shares lost 2.92 per cent of their value by midday. The Stock Exchange of Thailand (SET) index fell to 583.59 by the midday break in trading, down 17.70 points or 2.92 per cent.
Philippine shares closed 1.4 per cent lower, down by 37.93 points to close at 2,569.65.
In Australia, stocks slid 4.2 per cent, with the ASX200 slipping 206 points, or 4.2 per cent, to 4,600.
Shares fell across the board, with resources stocks worst hit because of fears that the crisis will affect the wider economy and crimp global growth.
New Zealand’s stock exchange was the first to open after announcement of the rejection of the US bail-out, with the NZX-50 opening more than 4 per cent down.
It recovered slightly, but at the close of trading stood at 3,074, a 113 point, or 3.7 per cent, fall.
India’s benchmark Sensex stock index recovered from early losses after market regulator the Securities and Exchange Board of India assured that the US financial crisis will not affect domestic bourses.
The 30-share-sensitive index plunged by 442.20 points soon after opening to a near two-year low of 12,153.33 - a loss of 3.5 percent - amid heavy selling in stocks of banking, metal, realty and IT sectors.
The Sensex later pared its losses and was trading at 12,612.28, up 0.13 per cent by press time.
The broader S&P CNX Nifty index of the National Stock Exchange also recovered and was trading at 3,846.10, down 0.10 per cent, around the same time.
As Hong Kong shares rallied from mid-morning Tuesday onwards and ended the day up 131.53 points or 0.76 per cent at 18,016.21 points. Turnover was 71.8 billion Hong Kong dollars ($9.24 billion).
The turnaround came as Hong Kong’s chief executive Donald Tsang spoke out about the city’s ability to withstand the effects of the global economic downturn.
Reacting to the rejection of the rescue package, Tsang said: “The Hong Kong market will suffer, but we must remember that in dealing with financial crises of this kind, Hong Kong has accumulated considerable experience.”
“Over the last 10 years we overcame the problem of the Asian financial crisis and economic problems led by the SARS epidemic,” Tsang said.
“We overcame them, and we must also remember that the economic fundamentals of Hong Kong are good, and our regulatory system, our fiscal economic system, are sound.”
Meanwhile, the Bank of Japan injected 2 trillion yen ($18.89 billion) into the money market Tuesday as an emergency measure to ease disruption in the financial markets.
Tuesday’s move marks the 10th consecutive business day of measures by the nation’s central bank since the US investment bank Lehman Brothers Holdings Inc filed for bankruptcy on Sep 15.
The total amount of liquidity the bank injected into the market comes to 20.1 trillion yen.
Japan Tuesday expressed concern over the rejection of the US government’s $700-billion bail-out plan. Japanese Prime Minister Taro Aso assured that the government would take any measures necessary to prevent negative effects on the nation’s economy and work closely with the international community to avoid a meltdown of the global financial system.
Economic and Fiscal Policy Minister Kaoru Yosano said that he understood the “delicate” situation in the US just before the November presidential election.
“But we are deeply concerned,” Yosano said. “This issue has great impact not only on the US economy but also on the global economy.”
Yosano added that he hoped to see the US Congress continue discussions and come out with a better result.
Meanwhile, Finance Minister Shoichi Nakagawa expressed surprise over the rejection of the bail-out plan, saying that Japan would monitor further developments until the US Senate votes on the bill.
“Japan will work closely with the US and Europe and watch the situation calmly with the hope that the US Congress will achieve some kind of progress,” Nakagawa was quoted by Kyodo News Agency as saying.
He called on investors in the Japanese stock market to react calmly because Japan was likely to suffer only a relatively small impact.
And yet, the Tokyo stock market plummetted nearly 5 percent in morning trading Tuesday after an overnight heavy sell-off on Wall Street.
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