Asian stock markets suffered a fresh mauling yesterday, with Tokyo plunging to a four-year low on growing doubts about whether a Wall Street bailout package can stem the global financial crisis.
Investors were spooked by signs of escalating problems in Europe after Germany’s fourth biggest bank had to be rescued over the weekend. The yen soared as investors unwound risky bets.
Tokyo’s Nikkei-225 index ended down 4.25 percent as Sydney lost 3.3 percent and Seoul tumbled 4.3 percent. Hong Kong was 3.4 percent lower by midday while Shanghai dropped 3.8 percent.
“The market is not convinced that the US bailout package can protect the economy from the financial crisis,” Toyo Securities strategist Ryuta Otsuka said.
In an effort to keep credit flowing, Japan’s central bank pumped emergency funds into the short-term money market for a 14th straight business day, pouring in 1 trillion yen (US$9.5 billion) in the morning.
Investors dumped shares after US stock markets fell sharply on Friday, despite US congressional approval of a US$700 billion bank bailout.
Dealers said declines reflected worries that the plan would not be a panacea for the broad economic and banking woes in the US.
Underscoring the worsening conditions in the world’s largest economy, 159,000 US jobs were lost last month, government figures showed.
“The approval of the financial rescue plan failed to bolster market confidence. Pessimism towards the global economy is running deeper,” said Young Wang, an analyst at Yuanta Securities Investment Consulting (元大投顧) in Taipei, where stocks ended down 4.1 percent at a four-year low.
As the US-born financial crisis takes a stronger grip in Europe, the German government agreed an emergency rescue package of 50 billion euros (US$68 billion) for Hypo Real Estate (HPE), late on Sunday before markets opened in Asia.
It also announced an unlimited guarantee for personal savings deposits.
Given the various economic conditions in each of the eurozone member countries, “it looks difficult for authorities to take dramatic and quick action like the US,” Barclays Capital analysts wrote in a note to clients.
Markets were looking ahead to a meeting on Friday of finance chiefs from the G7 rich nations, waiting for any announcements on coordinated action such as liquidity injections or interest rate cuts, dealers said.
A speech today by US Federal Reserve Chairman Ben Bernanke will also be closely watched for any clues on the possibility of a US interest rate cut.
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