Wall Street’s overnight freefall sent Asian stock markets tumbling sharply today as investors were gripped with fears of a global financial crisis.
Japan’s benchmark Nikkei 225 stock index plunged 4.8% to 11,632.99, falling under than 12,000-point level for the first time since mid-March.
South Korea’s Kospi shed 6.2% and Taiwan’s benchmark was off 4.6%. The battering in Australia and New Zealand was not quite as severe, with key indices down 2.4% and 2.7% respectively.
The early carnage in Asia followed a devastating Monday for world stock markets, which dropped precipitously after a double-fisted blow from Wall Street - news that Lehman Brothers had filed for bankruptcy and Merrill Lynch would be sold to Bank of America.
The Dow Jones industrial average fell more than 500 points in its worst point drop since after the September 11, 2001, terror attacks.
In Europe, the FTSE-100 share index closed down 3.9 percent in London, the Paris CAC-40 was off 3.7% and Germany’s DAX 30 index of blue chips sagged 2.7%.
Asia’s biggest stock exchanges in Japan, Hong Kong and South Korea were closed yesterday for national holidays.
In Tokyo, Kyodo news agency was reporting that the Japanese unit of Lehman Brothers Holdings had requested bankruptcy protection at a Tokyo court after the 158-year-old firm filed for Chapter 11 bankruptcy in New York yesterday.
The company, crippled by £33.3 billion in soured property holdings, was unable to find an investment partner to throw it a lifeline despite a flurry of last-minute negotiations over the weekend.
Share prices in Tokyo fell across the board, with banking issues taking a particularly hard hit in the wake of Lehman’s collapse. Investors unloaded shares in major Japanese banks listed as some of the biggest lenders, including Aozora Bank, Mizuho Financial Group and Shinsei Bank.
Aozora, a midsize Tokyo-based bank, retreated 19.7%, even as the company in a statement sought to reassure markets that its net exposure could be reduced to less than £13.9 million compared with the widely reported figure of £257 million.
Mizuho Financial Group, with a £160.5 million loan to Lehman, fell 9.6%. Shinsei was down more than 20%.
Japan’s central bank issued a statement that it would carefully watch the development and take appropriate measures to stabilise the market.
Falls on the Australian and New Zealand markets were not as sharp as in some countries, in part because they had already absorbed some of the shock of Lehman and Bank of America news.
New Zealand finance minister Michael Cullen sought to reassure investors in his country but also warned that the turmoil may not be over.
“This is probably the worst financial crisis for a very long time ... that doesn’t make it the same as the worst economic crisis,” he said.
“The US economy itself has continued to grow during the current year. The financial sector is in very serious difficulty and that has implications for the wider economy, but not what happened in 1929 to 31.”
He said the latest round of turmoil in the US “will tend to lower GDP forecasts for the world for the next year or two”.
Australia’s banks were hardest hit by today’s stock price falls, with the Commonwealth Bank of Australia, ANZ Banking Group, National Australia Bank Ltd. and Westpac Banking all declining between 2.3 and 3.7%.