Asian stock markets plunged today as government bank bailouts in the US and Europe failed to alleviate fears of a global financial crisis that would depress world economic growth.
Investors took scant comfort from Washington’s passage of a $700bn (€515bn) bank bailout on Friday, focusing instead on a dismal US jobs report that suggested the US economy – a vital export market for Asia - could slide into recession.
As the financial turmoil deepened in Europe, Germany yesterday announced a bailout package totalling €50bn for Hypo Real Estate, the country’s second-biggest commercial property lender, after a rescue plan by private lenders fell apart.
The move was part of a scramble by European governments to save failing banks.
Across Asia, all markets were in the red. Tokyo’s Nikkei 225 index fell to its lowest level in four-and-a-half years, sinking 4.25% to 10,473.09.
Hong Kong’s Hang Seng index slid 4.3% to 16,927.87. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also fell sharply.
In Russia, the RTS stock index tumbled more than 7% in first 20 minutes of trading.
“This credit crunch looks like it’s not going away any time soon,” said Alex Tang, head of research at brokerage Core Pacific-Yamaichi in Hong Kong. “Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the US economy.”
Investors appeared spooked by a series of developments out of Europe over the weekend.
Belgian Prime Minister Yves Leterme said yesterday that France’s BNP Paribas SA had committed to taking a 75% stake in troubled European bank Fortis NV.
British Chancellor Alistair Darling also said he was ready to take “pretty big steps that we wouldn’t take in ordinary times” to help the country weather the credit crunch.
The outlook for the US economy darkened after figures released on Friday showed that 159,000 jobs in the US were lost last month, the fastest pace in more than five years.
Such concerns overshadowed any investor optimism over the US House of Representatives’ approval on the same day of a massive bailout plan that will allow the US government to buy distressed mortgages and securities backed by mortgages from banks and other financial institutions.
Investors questioned how long it would take for the package to unfreeze credit markets, restore bank lending and generally shore up the US economy.
“The market had already figured in the package’s passage,” said Yukio Takahashi at Shinko Securities Co in Tokyo. “There are strong doubts about its implementation.”
Japanese financial companies and industries dependent on exports, such as steel, were especially hard hit today. Nippon Steel stock tumbled 9.8%, while Mizuho Financial Group was down 8.3% in morning trading.
Trading in mainland China resumed after a week‘s break with the benchmark Shanghai Composite Index sinking 5.2% to 2,173 by mid-afternoon.
Banks and other financial shares saw heavy declines. Shanghai Pudong Development Bank fell 7% and Bank of China slipped 3.6%.
Shares of Ping An Insurance rose even after it said it will record a 2.3 billion dollar (£1.3 billion) loss on its stake in European bank Fortis in the biggest blow yet to a Chinese institution from the global credit crisis. Ping An’s shares were up 1.6%.
US stock index futures were nearly 2% lower, suggesting Wall Street would open lower later today. The Dow Jones industrial average fell 157.47, or 1.5%, to 10,325.38 on Friday.
In currencies, the euro slid to US 1.3570 from US 1.3774 late on Friday. But the dollar was weaker against the yen, falling to 103.66 from 105.30 yen.
Oil prices tumbled on speculation that slower global growth will cut crude demand. Light, sweet crude for November delivery was down 3.23 dollars to 90.65 dollars a barrel in Asian electronic trading on the New York Mercantile Exchange.