Asian stocks were pummelled in a heavy sell-off yesterday, following a slump on Wall Street that was triggered by big losses at General Motors, a falling dollar and soaring oil prices, dealers said.
Trading screens across the region showed plummeting prices, with Chinese shares particularly badly hit as Shanghai tumbled 4.85 percent on steep losses overseas that dealt a blow to confidence, while Taiwan shares closed 3.90 percent lower.
Elsewhere Tokyo fell 2.0 percent, Hong Kong and Seoul both lost 3.1 percent, Manila gave up 2.5 percent and Sydney slumped 2.6 percent as investors took their cue from New York, where the Dow Jones posted a 2.6 percent loss overnight due to worries about the US economy.
"Shares are following Wall Street lower amid heightened fears of a credit crunch," said Hirokazu Fujiki, equity strategist at Okasan Securities.
"The market does not know the extent of the fallout [from recent credit market turmoil]," Fujiki said. "That's why it is scared."
Investors fear that major banks will be forced to book larger losses than previously thought on securities backed by subprime mortgages to homebuyers with patchy credit histories.
Morgan Stanley said fourth-quarter profit would be reduced by US$2.5 billion due to write-downs related to credit problems, becoming the latest US banking giant to reveal large subprime-related losses.
"Lingering worries over the fallout of the US subprime and credit crisis continue to weigh on sentiment," said Howard Gorges, vice chairman at South China Securities in Hong Kong.
Europe's main stock markets also slumped in opening trade yesterday, with London down 1.28 percent.
Tokyo's Nikkei index slipped below the key 16,000 points level to a two-month low, with a stronger yen and weaker-than-expected domestic machinery orders piling on additional pressure.
"Uncertainty about the US economic outlook has spread in the wake of GM's announcement," said Hiroichi Nishi, a general manager of equities at Nikko Cordial Securities.
"There is talk that US and European funds are cashing in holdings of Japanese stocks," Nishi said.
General Motors on Wednesday posted a record loss of US$39 billion for the third quarter on a massive accounting charge.
Meanwhile the yen's sharp appreciation against the dollar also made investors cautious as it reduces the value of Japan's export earnings.
Wall Street was also spooked by the euro's continuing surge against the dollar following reports China might diversify its massive foreign exchange reserves away from the US unit.
High oil prices added to the jitters about the outlook for corporate earnings, although oil prices retreated from record peaks, falling back under US$96 a barrel yesterday as concerns about tight supplies eased slightly.
Investors are concerned that high oil and fuel prices will hit consumer spending and push up firms' costs.
"It's plain and simple. The big drop on Wall Street is enough to make investors stay out of the game for a while," said Rommel Macapagal, chairman of Westlink Global Equities in Manila.
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