Aug. 9 - Asian stock markets plunge as investors dump riskier assets in a global rout triggered by fears that EU and U.S. leaders are failing to tackle debt crises. Toshi Maeda reports.
Asian stock markets took a nosedive on Tuesday (August 9), following an overgnight, 6 percent fall on Wall Street, amid fears that political leaders are failing to tackle debt crises in Europe and the United States. Major indexes across Asia fell between 4 and 9 percent in early Asian trade. Australia's benchmark tumbled 4.5 percent to take its decline from a recent April peak to more than 20 percent, although buyers stepped in later in the day and halved the day's losses. Hong Kong's Hang Seng fell close to 8 percent to its lowest level in more than two years before trimming losses. South Korea's KOSPI tumbled over 9 percent at one point, prompting a stock exchange official in Seoul to say it may ban short selling of shares to stabilise markets. Taiwan stocks plunged more than 5 percent to a 14-month intraday low. Market sentiment was also hit hard after broad net selling of Taiwanese shares by foreign investors on Monday (August 8) topped 30 billion Taiwan dollars. Meanwhile, China's Shanghai Composite Index fell to its lowest since July last year. China is the biggest foreign owner of U.S. Treasuries, and experts caution the U.S. debt crisis could affect bilateral ties between the world's two largest economies. (SOUNDBITE) (English) ASSOCIATE PROFESSOR WITH THE CHINESE ACADEMY OF FINANCE AND DEVELOPMENT LI JIE SAYING: "The response from the U.S. side is still uncertain. They cannot guarantee they will repay their debt. So this is the big issue between these two big countries. They definitely will have more talks between these two. Because China has a big stake in this U.S. bond market." Japan's Nikkei average dropped nearly 4 percent, with analysts saying many investors initially underestimated the potential market impact of the U.S. credit rating downgrade. The Nikkei posted a less severe slide on Monday (August 8), but it now looked vulnerable with new sell orders coming in and the potential for fund redemptions and margin calls. Still, Societe Generale economist, Takuji Okubo, said he believes the spreading debt crisis in the euro zone will have little direct affect on Japan. (SOUNDBITE) (English) CHIEF JAPAN ECONOMIST AT SOCIETE GENERALE TAKUJI OKUBO, SAYING: "If the problem can be contained to Europe, it shouldn't pose a huge problem for Japan. After all, Europe accounts for only 11 percent of Japanese exports. On the other hand, Japan exports 56 percent of its merchandise to Asia. So long as this emerging part, especially Asia, remains robust, we do not think it poses that serious a risk to Japan." Meanwhile, Japanese policymakers voiced growing alarm on Tuesday (August 9) as the yen inched back to highs scaled prior to last week's intervention. Against the yen, the dollar slipped to around 77.20 from above 80 yen just last week. Toshi Maeda, Reuters.