Hong Kong: Asian stock markets fell sharply on Tuesday as investor confidence in the US financial system eroded even further, despite a government-backed plan to help beleaguered mortgage financiers Fannie May and Freddie Mac.
Every major index was in the red by midday, with Hong Kong’s Hang Seng Index dropping 3.2% and Taiwan’s benchmark losing nearly 4% at one point.
In Tokyo, the Nikkei 225 index shed 2% to 12,750.10.
While losses spread across most sectors, banks were hit particularly hard as investors worried that trouble in the US financial markets would spillover to Asia. Japanese traders, for instance, were rattled by a local business newspaper report that the country’s top three banks hold a combined 4.7 trillion yen (Rs1,91,905 crore) in Fannie May and Freddie Mac debt.
Those two government-chartered companies received a boost on Sunday when the US central bank and Treasury Department promised to step in with short-term funding and other aid should mortgage losses mount. Together, the companies hold or back about half the outstanding mortgages in the United States.
A sell-off of regional banks overnight on Wall Street, as well as fears that other American banks might face difficulties ahead, only added to the unease. On Monday, the Dow Jones industrial average fell 45.35, or 0.41%, to 11,055.19 after spiking nearly 140 points in early trading.
“Investors are quite concerned we could be heading toward a meltdown in the equities market if there’s no rebuilding in confidence, especially in the US,” said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.
In Japan, banking giant Mizuho Financial Group Inc.’s shares dipped 3.5% and Mitsubishi UFJ Financial Group Inc. was down nearly 4%.
Meanwhile, China’s biggest lender, ICBC, dropped almost 5.1% in Hong Kong trading. China Construction Bank was off 4.9%.
China’s most-watched index in Shanghai was off 2.5%. Elsewhere, South Korea’s benchmark slid 2.6%, India’s Sensex lost 2.3% and Australia’s main index slipped 2.3%.
In currency trading, the dollar declined against the yen to 105.83. The greenback was flat against the euro.