Asian stocks dive as US bailout bill failure creates panic

Asian stocks dive as US bailout bill failure creates panic

Tokyo: Stocks plunged in Asia on Tuesday as fears of escalating financial turmoil triggered panic selling on world markets after Washington policymakers unexpectedly shot down a US financial rescue plan.

In Tokyo and Hong Kong stocks were some 5% in the red despite calls from policymakers for markets to keep their cool after a record plunge on Wall Street.

The shock rejection by Congress of the $700 billion bailout package raised fears of a deepening of the financial and economic turmoil that has rocked global markets and brought down some of the world’s top banks.

Investors rushed to dump equities and move into safe havens such as bonds and gold. In Tokyo the Nikkei plunged by almost five percent to hit a three-year low, before clawing back slightly.

Hiroichi Nishi, equities chief at Nikko Cordial Securities, said he had been shocked by the rejection of the package by Congress.

“The market is exploring where the bottom is now," he said, adding that all eyes were on whether the US House will vote on the rescue plan again or the White House will come up with new measures.

Hong Kong share prices opened down 5.6%. Taipei lost 6.2% while Seoul slumped 5% before pulling back to end 2.9% off at midday. Sydney tumbled more than 5% at one point before recovering some of the losses.

Overnight on Wall Street, the Dow Jones Industrial Average sank 777.68 points or 6.98% to close at 10,365.45 in its biggest single-day point decline ever.

The slide eclipsed a 684-point drop on 17 September, 2001, when the markets reopened following the 11 September terror attacks. In percentage terms, the blue-chip drop was the 17th worst on record.

“Markets need certainty and stability, but at the moment markets are dysfunctional. Everyone is confused and wondering what will happen next," ANZ Bank chief economist Cameron Bagrie in Wellington told Dow Jones Newswires.

Japan’s economic ministers voiced hope that the United States would take action to halt the Wall Street meltdown.

As stocks plunged, Japan’s central bank injected two trillion $19.2 billion of emergency funds into the Tokyo money market to try to calm the renewed financial turmoil.

It was the 10th consecutive business day that the Bank of Japan (BoJ) has pumped cash into the domestic financial system to try to keep credit flowing.

Markets were seeing “a return to the state of extreme turmoil seen up to the time the US government proposed" the plan to buy up toxic debts from struggling banks, Barclays Capital analysts wrote in a note to clients.

The US Federal Reserve and other major central banks nearly doubled swap lines to $620 billion on Monday.

In the US, Citigroup agreed to take over the banking operations of Wachovia in a deal that gives the government a stake in one of the nation’s largest banks, highlighting the ongoing woes of the sector.

World oil prices fell further in early Asian trade, following a nearly 10% drop in New York as traders bet that demand for energy will ease due to the escalating economic and financial turmoil.

New York’s main contract, light sweet crude for November delivery, shed 18 cents to $96.19 a barrel.

The euro was under pressure after the rescue of several European banks deepened worries about the region’s banking sector.