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HONG
KONG—Asian and European stock markets fell sharply
Tuesday as investor confidence in the US financial
system eroded even further despite a government-backed
plan to help beleaguered mortgage financiers Fannie Mae
and Freddie Mac.
Every
major index suffered declines, with Hong Kong’s Hang
Seng Index dropping more than 3.8 percent and Taiwan’s
benchmark losing over 4.5 percent. In Tokyo, the Nikkei
225 index dropped nearly 2 percent to close at
12,754.56.
In
Manila, the Philippine Stock Exchange Index fell 44.01,
or 1.8 percent, to 2,413.26 led by banks and developers.
Bank of the Philippine Islands dropped P1.40, or 3.9
percent, to P37. Philippine National Bank declined P1,
or 3.9 percent, to P25.
European
stocks also fell in early trading. Britain’s FTSE 100
retreated 1.2 percent, Germany’s DAX lost 1.7 percent
and France’s CAC-40 was off 0.8 percent.
While
losses spread across most sectors in Asia, financials
were hit particularly hard as investors worried that
trouble in the US financial markets would spill over to
Asia.
Japanese
traders were rattled by a local business newspaper
report that the country’s top three banks hold a
combined ¥4.7 trillion ($44 billion) in Fannie Mae and
Freddie Mac debt. Another newspaper report unnerved
Taiwan’s market with news that at least two leading
financial institutions have invested in the mortgage
giants, and the country’s central bank may also have
purchased their bonds.
In
China, rumors were circulating that the Chinese
government had also invested in Fannie and Freddie
bonds.
The two
government-chartered companies received a boost Sunday
when the US central bank and Treasury Department
promised to step in with short-term funding and other
aid should mortgage losses mount. Together, the
companies hold or back about half the outstanding
mortgages in the US.
A
selloff of regional banks overnight on Wall Street, as
well as fears that other American banks might face
difficulties ahead, only added to the unease. On Monday
the Dow Jones industrial average fell 45.35, or 0.41
percent, to 11,055.19 after spiking nearly 140 points in
early trading.
“Investors are quite concerned we could be heading
toward a meltdown in the equities market if there’s no
rebuilding in confidence, especially in the US,” said
Alex Tang, head of research at Core Pacific-Yamaichi in
Hong Kong.
In
Japan, banks and insurance issues got slammed.
Mitsubishi UFJ Financial Group plunged 5.32 percent,
Mizuho Financial Group was down more than 5 percent and
Sumitomo Mitsui Financial Group plunged 6.11 percent.
Earlier in the day the Bank of Japan kept interest rates
on hold, deciding to take a wait-and-see approach amid
the current volatility.
“With
regard to risk factors, global financial markets remain
unstable and there are downside risks to the US and the
world economy,” the central bank’s policy board said in
a statement.
A higher
yen dragged down major exporters such as auto makers and
electronics firms. A stronger Japanese currency reduces
the value of exporters’ profits when repatriated from
abroad.
In Hong
Kong, the blue-chip Hang Seng Index plunged almost 840
points to 21,174.77—its lowest close in nearly four
months. China’s biggest lender, ICBC, dove nearly 5.2
percent, and HSBC lost more than 3 percent. Heavyweight
China Life Insurance slid 5.3 percent.
In
mainland China, the benchmark Shanghai Composite Index
fell 3.4 percent to close at 2779.45. The drop was
sharpest for real-estate developers, banks and insurers.
Among financial companies, China Life and Ping An
Insurance both tanked 6 percent. Midsize lender Pudong
Development Bank Ltd. dropped 7.1 percent.
The
government is due to release closely watched inflation
data Thursday, which could add to pressure for an
interest-rate hike. Analysts expect a decline from May’s
7.7 percent but expect the rate to stay above the
government’s 4.8-percent target for the year.
Elsewhere, South Korea’s benchmark slid 3.2 percent,
India’s Sensex was down 4.6 percent in late trade and
Australia’s main index lost 2.1 percent. (AP, Bloomberg) |
