Tokyo: Asian stocks fell to their lowest in months Thursday -- and European stocks followed in early trade -- battered by persistent jitters over U.S. housing loan problems and their possible damage to global financial markets.
The benchmark Nikkei 225 index closed down nearly 2% on the Tokyo Stock Exchange after falling below the key 16,000-point mark the first time since November. South Korea’s main benchmark fell 6.9% to its lowest finish since May, and Hong Kong’s blue chip Hang Seng Index was down 3.9% late afternoon.
Meanwhile, European stock indices dropped in early trade there, with Britain’s FTSE, France’s CAC-40 and Germany’s DAX all down around 2%.
Repercussions in Asian markets were bigger compared to the loss of 1.3% overnight in the U.S. -- where the loan problems erupted -- with at least three Asian markets losing more than 6% on the day.
That’s because of uncertainty over the size of impact on corporate earnings and the regional economy, said Shinichi Ichikawa chief strategist at Credit Suisse. He said the weakness of the dollar and the euro also fueled the concerns.
“The issue of the subprime loans is not just the problem of that sector but it also affects many related financial products, (and) the size of a possible damage or other details are not clear, and that’s why investors are feeling uneasy,” Ichikawa said.
“All of Asia and other European markets are watching the U.S. market,” said James Soh, a strategist at Korea Investment & Securities Co. in Seoul. Global investors were focused in particular on the U.S. Federal Reserve, he said.
The Federal Reserve added more cash to the U.S. banking system Wednesday, and other central banks have been pouring cash into their banking systems as well since the end of last week. But the injections has so far failed to quash investors’ jitters and halt the global slide.
Some investors have been calling for the U.S. central bank to free up more cash by making an interest rate cut at its Sept. 18 meeting, but the Fed has given no indication it is considering a hike.
The Bank of Japan injected 400 billion yen (US$3.4 billion; euro2.5 billion) into money markets Thursday morning, the third time since last Friday it has acted in a bid to curb rises in a key overnight interest rate.
Despite the move, banking issues took a beating in Tokyo due to the global credit concerns. Sumitomo Mitsui Financial Group was off nearly 6 percent at midday.
Later Thursday, New Zealand’s central bank said it is closely monitoring domestic market movements and stands ready to inject liquidity if needed.
“Following the recent disruptions in global credit markets, the Reserve Bank has been closely monitoring the impact on the domestic markets and liquidity conditions,” Acting Governor Grant Spencer said in a statement.
South Korea’s Vice Finance Minister Kim Seok-Dong echoed the concern, vowing to swiftly deal with the impact of global market fluctuations .
“If there is a credit crunch in the domestic financial market due to a ripple effect from international financial markets, the government will deal with the matter by immediately injecting liquidity,” Kim said.
New Zealand’s benchmark NZX-50 fell 1.2% on Thursday to close at 3,957.94, its fifth loss in five days.
Australia’s benchmark S&P/ASX 200 index was down 1.3% midafternoon.
Stocks also plunged elsewhere in Asia.
The Philippine benchmark closed down 6% after crashing through the 3,000-mark. Indonesia’s standard stock index was down more than 6 percent.
Taiwan’s main stock index closed down 4.6%. China’s main index in Shanghai was down 2.4%. Singapore’s Straits Times Index was down 4.3%, and India’s Sensex 30-stock benchmark index was down 3.7% midday after plunging more than 4 percent shortly after opening.
The Dow Jones industrial average fell 1.29% overnight to 12,861.47, closing below 13,000 for the first time since April 24.