Asian stock markets yesterday caught the global selling fever after new warnings of world recession and as fears grew over the future of European banks with heavy exposure to sovereign debt.
Investors across the region picked up on the mounting anxiety evident in the US and Europe, where the markets saw fresh carnage on Thursday.
Safe havens were the main beneficiaries, with gold soaring and the yield on 10-year US Treasury bonds briefly touching a new low.
Adding to woes in the region were fears that a slowdown in the galloping growth seen in China — a key driver of the world economy — could hit equities.
“Given the bloodbath seen across global equity markets overnight, it is not at all surprising to see our market experiencing sharp and broad-based losses,” IG Markets analyst Ben Potter said in Australia, adding that there was no end in sight. “From experience, these situations always go on for a lot longer than people think they should. Given the global financial crisis is still so fresh in people’s minds, the market is going to have to do a lot to win back the confidence of investors.”
Tokyo tumbled 2.51 percent, hit by the double-whammy of global fears and the persistently strong yen, with the headline Nikkei index at down 224.52 points at 8,719.24.
Sydney shed 3.51 percent. The benchmark S&P/ASX 200 was down 149.3 points at 4,101.9.
Seoul plunged 6.22 percent, with the benchmark KOSPI down 115.70 points at 1,744.88. South Korean exporters, such as Samsung Electronics and Hyundai Motor, bore the brunt of the losses.
Hong Kong dropped 3.08 percent with the benchmark Hang Seng index down 616.35 points to 19,399.92. Shanghai shed 0.98 percent, or 25.11 points, to finish at 2,534.36.
The worldwide sell-off came after Wall Street investment bank Morgan Stanley warned that the US and eurozone economies were “dangerously close” to a double-dip recession.
Stocks were further punished by a fresh round of gloomy economic data from the US, such as jobless claims, and growing doubts about the ability of European banks to withstand the 17-nation eurozone’s debt crisis.
The rout continued in European trade, with the continent’s main bourses all showing large losses in early trade.
London’s FTSE-100 index of leading shares sank 3.07 percent to 4,935.73 points, Frankfurt’s DAX 30 lost 4.41 percent to 5,355.79 points and Paris’ CAC 40 index showed a loss of 3.43 percent to 2,974.54 points.
Gold and US Treasury bonds — both safe havens in times of trouble — broke record ground, with bullion closing at a record US$1,862-US$1,863 an ounce. It had finished Thursday trade at US$1,794-US$1,795.
Yields on 10-year US Treasury bonds were down at one point on Thursday to an all-time record low of 1.974 percent, breaking the record of 2.007 percent set on Dec. 18, 2008, at the height of the US recession.
By the end of the day in New York, the 10-year US Treasury yield was at 2.07 percent, compared with 2.17 percent late on Wednesday, while the 30-year yield was at 3.42 percent, down from 3.57 percent.
A report in the Wall Street Journal that the US Federal Reserve was worried about the liquidity of major European banks contributed to the sell-off in European markets.
French lenders came under especially intense pressure, with Societe Generale losing more than 12 percent.
“Europe is frankly a mess and the United States, which I’m normally much more optimistic about, we’ve seen a crisis which was created by the partisan nature of its current politics,” said Mike Smith, head of one of Australia’s big four banks, ANZ. “That’s created further concern to what was already a pretty fragile recovery.”