Asian markets fall after Wall St turmoil

Asian stock markets were down sharply today amid growing alarm over the world’s financial system as investors braced for a seismic shake-up on Wall Street involving the likely collapse of Lehman Brothers and the takeover of Merrill Lynch.

Asia’s biggest stock exchanges in Japan, Hong Kong and South Korea were closed for holidays, but every market open was deep in the red.

Taiwan’s benchmark tumbled 4.3%, Australia’s key index was down 2.5% and Singapore dropped 3.1%.

The declines came as Wall Street and the US government took a series of steps aimed at bringing an end to the credit crisis that has roiled the global financial system for more than a year.

Troubled US investment bank Lehman Brothers Holdings Inc. is to file for bankruptcy after Barclays PLC withdrew its bid for the bank.

Merrill Lynch and Co. was expected to be bought by Bank of America Corp. for about $50bn (€35bn).

A global consortium of banks, meanwhile, announced a $70bn (€49bn) pool of funds to lend to ailing financial companies, a move geared toward preventing a worldwide panic on stock and other financial exchanges.

The US Federal Reserve chipped in with more largesse in its emergency lending programme for investment banks.

The shake-up was needed to restore confidence in the markets, said Lorraine Tan, director at Standard and Poor’s equity research in Singapore.

“A lot of people are getting burned,” she said. “It’s better to get this out of the system. Hopefully for the US this could be it as far as potential failures of investment banks.”

Investors fearful that the financial distress could spread to Asia sent regional bank stocks plunging.

Macquarie Group Ltd, Australia’s largest investment bank, plummeted 8.4%. In Taiwan, Shin Kong Financial Holding lost 6.9%.

The dollar was also down sharply, falling to 105.57 yen from 107.92 yen late on Friday.