Hong Kong: Asian stock markets plunged on Tuesday after the collapse of Lehman Brothers caused a meltdown on Wall Street, with governments holding emergency meetings to stave off a wider financial crisis.
Hong Kong opened off 6.5% and Tokyo was down more than 5.0% as trading screens across the region went red on the heels of the biggest one-day point loss on the US markets since the 11 September terror attacks.
Officials appealed for calm, trying to avert a public panic and urging investors not to over-react to the plunge, which comes after months of market turmoil set off by US subprime, or high-risk, housing loans.
But the bankruptcy filing by Lehman, a US banking institution that had survived even the 1929 stock market crash in the Great Depression, intensified worries about the seemingly endless fallout from the subprime mortgage fiasco.
US Treasury Secretary Henry Paulson vowed on Monday to ensure “stability and orderliness” at home and overseas, but markets across Asia found no solace after news that two Japanese banks were among Lehman’s biggest lenders.
Aozora, one of those banks, lost almost 18% of its share value by mid-day. Meanwhile Lehman’s Japanese unit was reported to have liabilities of $32.6 billion - the second most of any bankruptcy filing in post-war Japan.
Government officials held an emergency meeting with Bank of Japan (BoJ) governor Masaaki Shirakawa. The BoJ injected $14.4 billion dollars into money markets to try to calm the turmoil.
But there were fears the chaos would continue to have a broad impact across Asia, not least in Japan, the world’s second-largest economy after the United States.
In South Korea, share prices were down 5.4% in early trade and the currency, the won, was down three percent against the dollar. The central bank said it would intervene on the foreign exchange market if necessary.
American International Group (AIG), one of the world’s biggest insurance companies, slid 60.8% and could now be facing the end after three major credit agencies lowered their ratings for the firm.
Meanwhile Merrill Lynch got a lifeline with a $50 billion takeover deal from Bank of America in a move that appeared to ease some worries. But shares in Bank of America fell 21%.
European markets were also sharply affected on Monday. London’s FTSE 100 index slumped 3.9%, the CAC 40 in Paris lost 3.8% and in Frankfurt the DAX shed 2.7%.
The Hong Kong government said it would ensure orderly market trading as shares tumbled sharply. At least six blue-chip stocks were down more than 10% by mid-morning.
Markets across the region were hit hard. Sydney was down 2.6%, Jakarta opened down 6.5%, Shanghai was off 4.1% and Singapore was off 2.3%.
Manila plunged 4.3% at the opening bell. Taipei shares were off 3.9%.