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Asian markets plunge on fears crisis is spreading

(Agencies)
Updated: 2008-10-06 15:57

SINGAPORE -- Asian stock markets plunged Monday as investors took scant comfort from Washington's passage of a US$700 billion bank bailout and focused instead on deepening financial turmoil in Europe that threatens to slow global growth.

A trader reads a newspaper on the trading floor of the Philippine Stock Exchange, which closed down 2.6 percent in today's trading, in Manila's Makati financial district October 6, 2008. Asian stocks dropped by around 5 percent on Monday as investors doubted a scattered European response to the financial crisis and a $700 billion US bank bailout could prevent a deeper slump in the global economy. [Agencies]

Traders were spooked by Germany's announcement Sunday of a new bailout package totaling 50 billion euros (US$69 billion) for Hypo Real Estate, the country's second-biggest commercial property lender, part of a scramble by European governments to save failing banks.

A dismal report on the US job market released Friday added to the gloom, fanning worries about US consumer demand for Asian exports.

Japan's benchmark Nikkei 225 average sank 4.2 percent to 10,475, while Hong Kong's Hang Seng index slid 3.4 percent to 17,089. Markets in Chinese mainland, Australia, South Korea, India, Singapore and Thailand also fell sharply. Indonesia's key index plunged more than 5 percent.

"This credit crunch looks like it's not going away any time soon," said Alex Tang, head of research at brokerage Core Pacific-Yamaichi in Hong Kong. "Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the US economy."

"We haven't seen any positive developments in Europe or the US, apart from the rescue plan," Tang said. "But even with the rescue plan, investors are focused on the slowing economy."

Investors were processing a series of developments out of Europe over the weekend. Belgian Prime Minister Yves Leterme said Sunday that France's BNP Paribas SA had committed to taking a 75-percent stake in troubled European bank Fortis NV.

British treasury chief Alistair Darling also said he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country weather the credit crunch.

Figures released Friday showed that 159,000 jobs in the US were lost last month, the fastest pace in more than five years, showing that the world's largest economy is clearly suffering.

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