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Asian shares fall in wake of big Wall Street sell-off

Global market turmoil continued into a second week as Asian markets tumbled yesterday in the wake of Wall Street's sell-off on Friday amid persistent worries about a possible US -- and worldwide -- economic slowdown.

China's benchmark index plummeted 7.2 percent to its lowest point in six months on concerns that a recession in the US would mean less demand for Chinese-made products. Hong Kong's market sank 4.3 percent while India's Sensex dropped 3.5 percent in afternoon trading.

US stock index futures also were down, suggesting that Wall Street was poised to drop again when markets open.

Investors around the world have been jittery for weeks about a US slump, which would likely weaken demand for exports and hurt global growth. There is also concern about a worldwide credit crunch triggered by rising defaults in risky US mortgages, which has led to mountains of bad assets at major US and European banks.

"There's a lot of uncertainty out there: uncertainty over the US economy, uncertainty over China's economy," said Rob Hart, an analyst with Morgan Stanley in Hong Kong.

Japan's benchmark Nikkei 225 index fell 3.97 percent to close at 13,087.91, erasing its jump on Friday. Markets in South Korea and Taiwan also dropped.

In China, the Shanghai Composite index plunged 342.39 points to 4,419.29 amid worries about weaker demand from US consumers. Concerns over the potential impact of a prolonged bout of severe winter weather also took a toll.

Chen Huiqin (陳惠琴), an analyst at Nanjing-based Huatai Securities (華泰證券), said: "Investors, especially institutional investors, are very cautious."

She said investors were waiting for possible "market rescuing" signals from the Chinese government.

"That could have a strong impact on the market," Chen said.

Last week was a tumultuous one for global markets, and it appeared that turmoil would continue.

Asian and European stocks had plunged early last week on worries about slower US growth. They rebounded after a hefty three-quarters cut in US interest rates by the Federal Reserve last Tuesday, as well as news of a US stimulus package. By Friday, markets in Hong Kong and Tokyo had nearly recovered their early week losses.

But investors in Asia dumped shares again yesterday after Wall Street sank on Friday, when the Dow Jones slid 1.38 percent and the technology-heavy NASDAQ composite index declined 1.47 percent.

Some traders said Asian markets were dropping on concern that the Fed may not slash interest rates again -- or as much as expected -- when its policy planners meet today and tomorrow.

"The possibility for a 50 basis points cut is looking less likely," said Castor Pang, a strategist at Sun Hung Kai Financial (新鴻基金融集團) in Hong Kong, pointing to future prices in the US.

Dow futures were down 141 points, or 1.15 percent, to 12,095, while NASDAQ futures were down 24 points, or 1.34 percent, to 1,769.5.

Japan's economy may already be contracting, said Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan.

He pointed out that five of the 11 components of Japan's business condition diffusion index have already hit highs and begun deteriorating. Declines in six of the 11 often indicates recession is coming.

"A recession, which was nothing more than a risk scenario six months ago, is now turning into our main scenario," Yamakawa said in a report released on Friday.
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