Concern for world economy as Asian markets plunge

A massive sell-off on Wall Street and an escalating global equity crisis sent Asian stocks plunging today, with Japan’s benchmark index in the midst of a gut-wrenching freefall.

The benchmark Nikkei 225 stock average plummeted 974.12 points, or 10.6%, to 8,183.37 at the close of the morning session. The index at one point had lost more than 11%.

“Selling is unstoppable in New York and Tokyo,” said Yutaka Miura, senior strategist at Shinko Securities Co. Ltd. in Tokyo. “Investors were gripped by fear.”

Elsewhere, Hong Kong’s Hang Seng index tumbled more than 8%, South Korea’s Kospi shed 7.4%, Shanghai’s benchmark fell 4.1%, and Singapore’s Straits Times index was off 7.0%. In Syndey, Australia’s S&P/ASX200 was down 6.8%.

These regional declines follow a 7.3% plunge in the Dow Jones industrial average yesterday to close below the 9,000-line for the first time in five years.

Stocks nose-dived after a major credit-rating agency said it might cut its rating on General Motors Corp. and Ford Motor Co., further rattling investors already fretting over the impact of tight credit on the economy.

The Dow’s 2,271-point tumble over the last seven sessions is its steepest seven-day point drop ever. Its seven-day percentage decline of 20.9% is the largest since the seven-day plunge ending October 26, 1987, when the Dow lost 23.8%. That sell-off included Black Monday, the October 19, 1987 market crash that saw the Dow fall nearly 23% in a single day.

Lucinda Chan, associate director of Macquarie Equities in Sydney, called the market moves “ghastly”.

“It is a very different and very unprecedented climate at the moment,” she said. “Growth is going to be a major concern in this market and that is why the Australian market is getting a very hard pinch because we are a commodity export nation.”

Miura in Tokyo said the ongoing meltdown in global financial markets showed “confusion and uncertainty” among investors worldwide.

“Investors are not so sure that the G7 will announce effective measures to contain the global financial crisis,” Miura said.

Japan is set to propose to the world’s leading industrialised nations that a joint fund be set up to give emergency loans to nations hit by the growing financial crisis, a Japanese media report said today.

Japanese Finance Minister Shoichi Nakagawa will make the proposal at the G7 meeting of finance and central bank officials in Washington today, according to 'The Nikkei', a business daily.

The proposal will call for setting up a co-operative scheme through the International Monetary Fund to dole out emergency lending to nations whose financial systems run out of cash, the paper said, without citing sources.

China and Middle Eastern nations will also be asked to contribute money to the fund, the report said.

As the markets closed in Australia, analysts were calling it Black Friday. The benchmark S&P/ASX200 plummeted 8.34%, or 360.2 points, to close at 3960.7, its biggest one-day percentage loss ever.

Together with the 8.2% plunge on the broader All Ordinaries index – which marked its greatest loss in 21 years – Friday’s session wiped 106bn Australian dollars (€51.65bn) from the value of stocks.

New Zealand’s benchmark NZX-50 index fell 4.72% in trading Friday, its biggest one-day fall since October 24 1997, at the height of the Asian financial crisis.

At closing Friday the index had slumped 139.08 points to 2,805.31 points, its worst performance in six consecutive days of declines. During the past six trading days the market has shed 427.78 points, or 14.4%.