Asian markets drop in reaction to US bank bailout

The passage of the US rescue plan failed to ease fears in Asia over a spreading global financial crisis and markets across the region dropped in early morning trade.
In Tokyo, the Nikkei average fell 3.6 percent by midday to a four-year low. Approval by the US House of Representatives on Friday for a $700 billion financial rescue plan failed to restore much-needed confidence with investors now anxious as to how the plan will be implemented. The benchmark Nikkei lost 393.81 point to 10,544.33 – its lowest since May 2004. The broader Topix dropped 4.1 percent to its lowest since December 2003.
Takashi Ushio, head of the investment strategy division at Marusan Securities, said: “There's still a sense that the financial crisis really isn't all over yet, and it's definitely spilling over into the rest of the economy.”We're looking at a bad downward spiral."
That mood was reflected across Asia. Australian shares extended their losses to 3.8 percent by early afternoon trading with the top banks taking a particular beating. All were off more than 3.0 percent while National Australia Bank lost 4.4 percent amid worldwide concern about the resilience of the financial system. David Spry, research manager at FW Holst in Melbourne, said: “There’s just nothing positive out there. Figures are bad in the States, Europe’s bad, Japan’s bad and China’s probably slowing.” Figures on Friday showed US employers cut 159,000 jobs last month, a ninth straight monthly reduction and the deepest in five and a half years.
The gloom showed up from Indonesia where stocks slumped by 5.3 percent in early trade to Thailand where the market was down 2.36 percent to a new five-year low.
Hong Kong’s Hang Seng Index was down 2.9 percent at 17,169.99 with the shares of locally listed mainland Chinese firms particularly hard-hit amid concerns China’s economy may not escape a slowdown if exports are hit by a widening world recession.
Castor Pang, strategist at Sun Hung Kai Financial group in Hong Kong, said: “Weak Wall Street showing last Friday and poor jobless data in the US raised worries about the economy. Sentiment remained weak on US recession worries... amid the financial tsunami."
One of the biggest fallers was Macau casino operator Galaxy Entertainment whose shares plunged nearly 8 percent after China imposed more travel restrictions on Chinese visiting the gambling haven, threatening growth of casinos. From October 1, residents of neighbouring Guangdong province can only go to Macau once every three months instead of every two months.
Chinese share prices, which have been falling steadily since late last year, dropped further as the jitters from the U.S. failed to offset news that the authorities would allow margin trading on a trial basis. The Shanghai Composite Index was down 2.73 percent.
Regulators, struggling to support an equities market that fell some 70 percent in just under a year from last October, announced at the weekend that they soon allow investors to buy stocks on margin and to engage in short-selling. That introduction, which contrasts with regulatory moves to enforce greater caution in the rest of the world, is part of a series of policies to try to revive the market.
The reforms boosted the shares of brokerages. A small number of houses will be allowed to conduct such trades on a trial basis before the system is expanded to other securities firms.
The MSCI index of Asia-Pacific stocks outside Japan slid 2.1 percent to the lowest since June 2006.
South Korea's KOSPI was down 2.9 percent, led by shares of Samsung Electronics Co Ltd and POSCO, the world's fourth-largest steelmaker, the biggest drags. Korea's markets have been one of the hardest hit by a wholesale move by foreign investors away from perceived risk in Asia. The country's growing current account deficit has turned off investors, and news local banks were having trouble securing foreign-currency loans added to negative sentiment on Asia's fourth-largest economy.