Hong Kong: Asian stocks tumbled on Tuesday as concerns about the global credit squeeze and surging inflation flared again, with the Group of Eight, or G-8, industrial powers warning soaring food and fuel prices threaten world growth.
Taiwanese shares fell the most, sliding nearly 4%, closely followed by a slump of more than 3% in Hong Kong. The South Korean market was down nearly 3% and Asia’s biggest bourse, Japan, some 2.5%.
In India, the Bombay Stock Exchange’s benchmark Sensex index closed down 1.3%, or 176.34 points, at 13,349.65.
In Europe, stocks were down in afternoon trade on concerns that financial firms will need more capital and auto makers forecast slumping sales.
UBS AG, Deutsche Bank AG and Mitsubishi UFJ Financial Group Inc. retreated after analysts said the two largest US mortgage finance companies, Fannie Mae and Freddie Mac, may have to raise a combined $75 billion (Rs3.26 trillion). Car makers sank as France’s PSA Peugeot Citroen SA warned of a “greater slowdown” in demand in Europe and Italy’s Fiat SpA said it will close four auto plants.
“Investors are nervous,” said Chicuong Dang, an analyst at Richelieu Finance in Paris. “The market is falling on fears of bad news from banks, of new write-downs and need for recapitalization.”
Bad show: A man walks past a monitor displaying stock prices in Taipei, Taiwan. Taiwanese shares fell nearly 4% on Tuesday.
Europe’s Dow Jones Stoxx 600 Index sank 1.5%, while FTSE-100 index of the UK dropped 2.8%, extending its decline from last year’s high to 20%, the common definition of a bear market.
Investors were also nervous ahead of key second quarter earnings reports from major US banks, which have lost billions of dollars on securities whose value is linked to subprime loans. They also worry that surging inflation will crimp business profits, hit consumer spending and lead to higher borrowing costs.
However, Chinese shares bucked the trend to rise 0.81%, but the market in Singapore fell more than 1%. Smaller markets also closed down, generally by more than 1%.
In Tokyo, the benchmark Nikkei-225 index tumbled 326.94 points to end at 13,033.10, briefly falling below the psychologically important 13,000-level for the first time since 15 April.
The Hang Seng Index in Hong Kong ended down 692.25 points at 21,220.81.
Some analysts said the stock market’s decline had made valuations for most Hong Kong-listed stocks attractive.
In Australia, shares closed down 1.4%. The benchmark S&P-ASX 200 index was down 69.6 points at 4,932.9, its weakest close since August 2006.
“It is mainly the financial sector that has dragged most of the market down, which was a continuation of the theme out of the US last night,” said CMC Markets’ senior dealer Dominic Vaughan.
In China, the benchmark Shanghai Composite Index closed up 22.55 points at 2,814.95.
Airlines led the gains with Air China up 6.83% and China Southern Airlines 2.15%. Coal mines were also strong with China Shenhua Energy, the country’s largest coal producer, rising 3.01%.
However in Taipei, the weighted index in Taiwan fell 289.26 points to 7,051.85.
“Share prices fell sharply due to profit-taking from yesterday’s (Monday’s) rebound and an apparent lack of support from government-related funds,” said Allen Lin of Concord Securities. Surging food and fuel prices pushed Taiwan’s inflation rate in June to an 8-month high of 4.97%, government data showed.
“The high consumer price inflation reading hits consumption, and will cause the central bank to hike rates,” said Henry Miao of Hua Nan Securities Investment Management.
In South Korea, the benchmark Kospi index fell as much as 4.5% to an intra-day low of 1,509.20 before closing at 1,533.47, down 46.25 points.
“Inflation fears are escalating, producing greater uncertainty over how policymakers will handle interest rates and forex,” said Ryu Yong-Seok, a Hyundai Securities analyst.
“The Kospi may fall further to as low as 1,460 points.”
The blue-chip Straits Times Index of Singapore fell 47.50 points to 2,886.62.
“People are feeling increasingly cautious ahead of the results season both here and in the US and nobody wants to be caught out,” said an analyst at a foreign brokerage.
Equity prices in Malaysia also declined. The Kuala Lumpur Composite Index dropped 6.01 points, or 0.5%, to 1,121.25. “The market went down as investors were concerned about the US credit market while the regional slump soured sentiment after a bout of bargain hunting earlier,” said Phua Kwee Hock, an analyst at SJ Securities.
In Bangkok, the Stock Exchange of Thailand composite index fell 8.06 points, or 1.1%, to close at 722.50 points.
In New Zealand, shares closed up 1.25%. The NZX-50 gross index rose 39.14 points to close at 3,160.59.
“It’s really only the quality stocks that are coming in for attention,” said Grant Williamson of Hamilton Hindin Greene.
Bloomberg also contributed to this story.