Tokyo: Asian stock markets buckled on Thursday (15 August) as jittery investors rushed to dump shares after another rout overnight on Wall Street, with no sign of an end to the tremours emanating from the US mortgage sector.
From Tokyo to Sydney, Hong Kong to Singapore, weary dealers’ screens were awash with red again as fears over the fallout from problems in US credit markets continued to buffet stock markets around the world.
Seoul reeled from its biggest ever one-day points plunge, down more than six percent in morning trade.
Market watchers said that confidence had drained out of the markets, so even though many stocks look cheap there is no obvious trigger on the horizon for a rebound in global stock markets.
“Investors have moved from being super-optimistic to super-pessimistic in a very short space of time. Really, there is no sign of this ending,” said CommSec equities economist Craig James in Sydney.
Oil prices fell as traders fretted that the current market turmoil could put the brakes on the global economy, hitting energy demand.
The yen gained sharply on the euro and dollar, lifted by growing risk aversion.
All eyes remained on Wall Street where credit market anxiety gripped investors again Wednesday as the fear of the unknown prompted a flight to safe haven assets such as government bonds.
Tokyo set the tone for the region, with the benchmark Nikkei index down 3.7 percent in the early afternoon, slipping below the key 16,000-point level for the first time since November.
A fresh 400-billion-yen (3.4 billion dollars) injection of funds into the banking system by the Bank of Japan failed to calm frayed nerves.
Japanese banking shares in particularly took another pounding despite their recent insistence that they have only limited exposure to the problems in US subprime mortgages to high-risk borrowers.
“The market is in full flight,” said Jeremy Hall, a Japanese equity fund manager at Henderson Global Investors in Singapore.
He said Japanese banks on a fundamental basis were “looking extremely cheap” but the Tokyo market was being driven lower by bad news from overseas.
It was a similar story across the region. Hong Kong tumbled 2.5% in opening trade, Sydney was down 2.8%, Taipei tumbled nearly 5.0%, Manila slumped 3.4% and Singapore lost 3.46%.
“There are fears of a possible domino effect on international credit markets, as well as equity markets,” said Jih Sun Securities Investment Trust Co Ltd fund manager Bruce Yu in Taipei.
Seoul, which was closed on Wednesday, plunged by 6.35% in the steepest point slide on record as frantic investors scrambled to catch up with the heavy overseas selloff a day earlier.
Analysts believe that Asian companies have relatively little direct exposure to the problems in risky US securities backed by subprime mortgages.
But foreign funds, reeling from heavy losses in this high-stakes form of investment, have been unloading shares to raise badly needed funds.
“Hedge funds are getting out of this region,” said Pong Tang Siew, head of research at Malaysian lender MIMB Investment Bank.
“The market has hit a point where all traders have decided that they want to get out.”
KKR Financial, a specialty finance company linked to leading private equity fund Kohlberg Kravis Roberts & Co, said Wednesday it was facing potential losses of up to 290 million dollars on mortgage-backed securities.
Elsewhere around the region, Jakarta lost 5.6 percent, Kuala Lumpur was down 3.2 %, Bangkok dropped 2.66% and Shanghai gave up 1.34%.
The turmoil spilled over into the currency market, where the yen hit a five-month high against the dollar and a four-month peak against the euro as players unwound risky carry trade bets funded by selling the Japanese currency.
New York’s benchmark light sweet crude oil for September delivery dropped 53 cents to 72.80 US dollars in early Asian trade from 73.33 dollars in late US deals Wednesday as investors reduced their exposure to commodities.