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Asia stocks dive to 4-year lows on recession fears

(Agencies)
Updated: 2008-10-27 14:33

HONG KONG -- Asian shares extended losses on Monday, with Japan's Nikkei briefly hitting its lowest since 1982, as central bank policy moves including a record rate cut in South Korea were not enough to allay fears of a global recession.

A man walks past a board flashing the index of the Tokyo Stock Exchange in front of a securities company in Tokyo. Asian markets opened sharply down after another heavy rout on Wall Street, as the US called on the G-20 countries to meet in Washington on the global financial crisis. [Agencies]

Trading was chaotic amid continued doubts over whether governments can stem a crisis that is menacing financial markets, worldwide economic growth and company earnings.

Japan pledged fresh measures on Monday to try to shield the world's second-biggest economy from the financial crisis and said the Group of Seven would issue a joint statement on the yen, which has risen rapidly as investors flee riskier investments.

The yen slipped slightly against the dollar after the comments while Japanese shares pared losses but remained in negative territory.

Earlier in the day, South Korea slashed interest rates in an emergency meeting and Australia's central bank said it had intervened on Friday to support its tumbling currency.

The actions come in response to last week's sell-off in global stock and currency markets that set all kinds of largely unwelcome milestones. Signs of caution were evident throughout, as gold and some regional bonds rose on a bid to safety.

"The outlook in terms of growth and exports remains shaky, so it's hard to make a case for any sustained EM (emerging markets) rally for now," said Win Thin, a senior currency strategist at Brown Brothers Harriman in an email to clients.

"We continue to believe that markets will reward those countries that are acting proactively to avoid a deeper economic slowdown," he also wrote.

Japan's Nikkei index swung wildly in the morning session, falling to its lowest level in 26 years in early trade before making a short-lived rebound. By midday it was off 0.2 percent.

Lenders such as Mitsubishi UFJ Financial Group tumbled on concerns they will need to raise billions of dollars to offset hefty losses on their stock portfolios as a global equity market rout continues. MUFJ fell 11 percent.

After a volatile start, the MSCI index of Asian stocks outside Japan fell for a fourth consecutive session, losing 2.8 percent as of 0325 GMT, marking its lowest since June 2004.

The MSCI index has now lost about 41 percent since Sept 12, right before the collapse of investment bank Lehman Brother' set off a fresh round of heavy market selling. The index is down more than 60 percent for the year.

Other Asian markets also dropped amid skepticism that moves by policy makers will be enough in the short-term to stave off eroding economies or sharp drops in corporate earnings.

South Korean shares slumped 2.8 percent, even after the central bank cut interest rates by 75 basis points in its biggest such move ever.

Taiwan and Hong Kong shares fell more than 5 percent each at one point, with smaller losses seen in Australia and Shanghai. Trading was briefly halted in the Philippines after the market fell 10 percent, while Singapore was closed for a holiday.

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