Asian stock markets slipped in early trade today, tracking Wall Street lower as investors cashed in profits following a two-day rally.
Japan’s Nikkei 225 index dropped 113.99 points, or 1.21% to 9,333.58 after surging 14% in the previous session – its biggest single-day gain ever. Hong Kong’s Hang Seng Index lost 405.05, or 2.41%, to 16,427.83.
Markets in Australia, South Korea, China and Taiwan were also lower.
The drop followed US markets, where major benchmarks pulled back after President George Bush announced the government would use part of the $700bn (€515bn) financial bail-out to pump capital into major banks and help get lending flowing again. European governments are also investing billions in their own ailing banks.
Despite the measures, concerns about the global economy and company profits were still weighing heavily on markets, analysts said.
“We had a huge rally on Monday and Tuesday, so there has to be some profit-taking,” said Dariusz Kowalczyk, chief investment strategist for CFC Seymour in Hong Kong.
“There’s also more clarity about damage to the economy, and investors are likely to conclude that the rally at the beginning of the week overstates the potential for earnings.”
Asian stocks, even after the recent surge, are down sharply since the financial turmoil escalated last month.
Since September 12, the last session before US investment bank Lehman Brothers collapsed, the Nikkei has lost 23% and Hang Seng has shed 13%. Australia’s benchmark is down 12% and Taiwan’s key index off 17%.
In oil, light, sweet crude for November delivery was changing hands at $78.21 in Asian trade, down 42 cents. The contract fell $2.56 overnight to settle at $78.63 on the New York Mercantile Exchange.
The dollar weakened against the yen to 101.24.
Yesterday, a drop in a key bank-to-bank lending rate indicated banks might be growing more willing to lend to one another. The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.64% from 4.75%.
Japan’s current account surplus in August dropped 52.5% from a year earlier as the value of imports grew faster than exports on the back of a soaring oil import bill, the country’s finance ministry said today.
The surplus in the current account, the broadest measure of Japan’s trade with the rest of the world, was 988.8bn yen (€7.13bn), marking the sixth consecutive month showing a drop when compared to the previous year.
Among imported goods, oil alone accounts for 25% of Japan’s total imports. The ministry said oil imports in August soared 64.2% year-on-year. Japan depends on imports for nearly 100% of its oil supply.
Meanwhile, China is confident it can weather the current global economic crisis, vice premier Wang Qishan was quoted by state media as saying.
“With tools at our disposal, we are confident and capable of prevailing over the overall difficulties and challenges,” Mr Wang told visiting US Senator Chuck Hagel, the official Xinhua news agency said today.