Hong Kong: Asian stocks fell 2-3% on Monday, led by shares of exporters, after a hectic weekend in Europe as the financial crisis gathered steam there, knocking the euro to the lowest in a year.
Concerns about whether the $700 billion rescue plan, which was approved by the US Congress last week, would be quickly implemented and whether it would be enough to shore up the economy left investors seeking safety in US and Japanese government bonds and buying yen and Swiss francs.
Oil prices fell around $2 to just below $92 a barrel dragging down prices of metals and grains, on expectations damage from dysfunctional financial systems in developed economies would almost certainly push them closer to recessions.
“There’s just nothing positive out there. Figures are bad in the States, Europe’s bad, Japan’s bad and China’s probably slowing,” said David Spry, research manager at broker FW Holst in Melbourne.
Japan’s Nikkei share average fell 2.5% to the lowest since October 2004. Sectors that derive their revenues mainly from exports, such as electrical equipment, machinery and auto makers, led the index lower.
The MSCI index of Asia-Pacific stocks outside Japan slid 2.1% to the lowest since June 2006.
South Korea’s KOSPI was down 2.9%, led by shares of Samsung Electronics Co Ltd and POSCO, the world’s fourth-largest steelmaker, the biggest drags.
Korea’s markets have been one of the hardest hit by a wholesale move by foreign investors away from perceived risk in Asia. The country’s growing current account deficit has turned off investors, and news local banks were having trouble securing foreign-currency loans added to negative sentiment on Asia’s fourth-largest economy.
“Although we are not expecting a banking crisis in Korea, the credit crunch is likely to be most severely felt in Korea among Asian economies given the highly leveraged Korean corporate and households,” said Ashley Davies, currency strategist with UBS in Singapore.
The US dollar shot up 3% against the won to the highest in more than six years.
The dollar has been the beneficiary of a move by institutions and investors to cut the amount of risk in their portfolio. As a result, the euro fell 0.9 percent to $1.3642 after earlier falling as low as $1.3610.
The euro was down 1.9% at 142.18 yen the lowest since May 2006.
Europe’s scattered response to the financial crisis enveloping the region also weighed on investors.
Germany gave blanket bank deposit guarantee on Sunday to prevent panic as officials clinched deals to rescue Germany’s Hypo Real Estate - after an initial bailout failed - and recapitalize two other European banks.
Divisions in how European leaders think best to approach the financial crisis were clearly on display. Italian Prime Minister Silvio Berlusconi said on Sunday that Italy would revive the idea of a common bank bailout fund at a meeting of finance ministers on Monday, only a day after the leaders of Europe’s four biggest economies - Germany, France, Britain and Italy - decided against a coordinated bank rescue.
The 10-year Japanese government bond future was up 0.5 point at 138.19, rising for a third day.
The yield on the 10-year US Treasury note which moves in the opposite direction of the price, fell to 3.57% after earlier dropping to 3.52%, down from 3.60% late on Friday.