Asian stocks tumble after US rout
Asian stocks markets were thrown into a tailspin today as flustered investors fearing a possible global recession continued to flee stocks.
Hong Kong slid 6% and South Korea at one point plummeted nearly 10%.
Oil prices tumbled to their lowest in almost a year below 79 dollars a barrel on expectations that a slowing global economy could crimp demand for fuel. The dollar was lower against the yen and the euro.
The sell-off, which adds to sharp losses in the past few days, comes after the Dow Jones industrials fell 634.76 points yesterday, the sixth-worst point decline for the Dow in the last 112 years. It was Wall Street’s first day of trading after Standard & Poor’s downgrade of the US credit rating.
Wall Street appeared set for further losses today. Dow futures were off 174 points, or 1.6%, at 10,552 and broader S&P 500 futures shed 18.30 points, or 1.7%, to 1,093.30.
Michael McCarthy, chief strategist at Sydney-based stockbroker CMC Markets, attributed the market turbulence to fears that the struggling US economy is quickly losing momentum.
“We’re clearly in fear territory,” he said. “The major driver here seems to be weakness in the US economy. There are fears that it’s starting to stall and, if that’s the case, the whole global growth scenario could fall over.”
Japan’s Nikkei 225 index sank 2.3% to 8,892.12. Hong Kong’s Hang Seng plunged 6% to 19,258.51 – the sixth straight trading day of losses.
Japanese export shares continued to capsize on a strengthening yen, which makes products more expensive overseas. Consumer electronics giant Sharp dropped 3.7%, while Panasonic lost 2.1%.
The country’s car giants were also battered. Toyota lost 3.4%, while rival Honda slid 3.3% and Nissan sagged 2.8%.
Trading on South Korea’s Kospi was briefly suspended after it sank sharply – at one point down 9.7% – before paring losses to a 4.8% fall to 1,780.33.
Hynix Semiconductor, one of the world’s leading memory chip makers, shed 5.5%, while Samsung Electronics, the top global manufacturer of flat screen televisions, crumbled 4%.
Oil companies were stung by falling crude prices. Hong Kong-listed PetroChina, the publicly traded unit of China’s biggest oil and gas company, lost 8.8%. Sinopec, Asia’s biggest oil refiner by volume, lost 8.6%.
Bucking the trend was Australia’s benchmark S&P/ASX-200 index, which reversed earlier losses to rise 0.2 % at 3,994.80. Taiwan’s Taiex was 0.1% higher.
Jackson Wong, vice president of Tanrich Securities in Hong Kong, said the sell-off was creating opportunities for sophisticated investors to buy at bargain prices. What was unclear, he said, was when those investments might bear fruit.
“It’s still very hard to predict how the US market will do,” he said. “When the dust settles, if the situation doesn’t get worse in the US or Europe, the situation will rebound. But the US has to stabilise.”
Worries about the US economic recovery have been building since the government said economic growth was far weaker in the first half of 2011 than economists expected. Intensifying concerns were reports showing that the manufacturing and services industries barely grew in July, although job growth was better than economists expected last month.
Investors are also worried that Italy and Spain could become the next European countries to have trouble repaying their debts. Greece, Ireland and Portugal have already received bailout loans because of Europe’s 21-month-old debt crisis.
The fears have pushed investors to shun Spanish and Italian bonds, which have led to higher yields and in even higher borrowing costs for the two countries.
The European Central Bank stepped in yesterday and bought billions of euros worth of their bonds. The move helped to lower yields on Spanish and Italian bonds, at least temporarily.
Benchmark oil for September delivery fell 2.63 dollars to 78.66 dollars a barrel in electronic trading on the New York Mercantile Exchange.
That is the lowest settlement price of the year for crude, but is still higher than the 71.63 dollars per barrel low of the past 12 months. Oil hit that on August 24 last year, when a combination of disappointing economic news and abundant supplies drove down prices.
Crude fell 5.57 dollars, or 6.4%, to settle at 81.31 dollars per barrel on the Nymex yesterday.
In currencies, the dollar weakened to 77.25 yen from 77.70 yen late yesterday in New York. The euro rose to 1.4240 dollars from 1.4196 dollars.
