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Wall Street rebound fails to curb Asian stock rout

Asia's stock markets continued to tumble yesterday on concerns that a slowing US economy could spell trouble for Asia's export-dependent economies.

The losses extended the rout that began in China on Tuesday and swept through global markets.

Premier Wen Jiabao's (溫家寶) comments on Wednesday calling for financial stability only marginally eased fears, and more volatility was expected to continue as the market remained up 120 percent over the past 12 months, dealers said.

East Asia's largest markets -- in Japan, Taiwan and China -- ignored a rebound on Wednesday on Wall Street, where stocks rose after US Federal Reserve chairman Ben Bernanke made encouraging comments on the economy.

Japan's benchmark Nikkei-225 fell 0.86 percent to finish at 17,453.51 points on the Tokyo Stock Exchange, while the benchmark in Taiwan fell 2.83 percent to 7,678.67.

Stocks in China also dropped. The benchmark Shanghai Composite Index, which covers both A and B-shares listed on the Shanghai Stock Exchange, closed down 83.88 points at 2,797.19, while the Shenzhen A-share Index was down 18.02 points or 2.35 percent at 749.33.

Hong Kong share prices closed sharply lower, losing 1.55 percent.

The key Hang Seng Index closed down 304.91 points at the day's low of 19,346.60 after an intraday high of 19,643.41. The index has tumbled 1,365.05 points or 6.59 percent so far this week.

Singapore's stocks fell for a fourth day, the longest losing streak in nine months.

The Straits Times fell 11.57, or 0.4 percent, to 3092.58 at the close, adding to a three-day, 6.2 percent loss.

In Australia, the S&P/ASX200 index shed 22.3 points, or 0.4 percent, to 5,810.2 while the All Ordinaries index lost 18.1 points to 5,798.4.

"The US rally wasn't convincing so there is still some nervousness, and with profit taking and risk-aversion yesterday, people are probably sitting on the sidelines today," said Hans Kunnen, head of investment market research at Colonial First State in Sydney.

Bernanke's optimism was echoed by economists around Asia, who said that the latest sell-off was more a sign of investors' anxiety about record-breaking rallies over the past several months than a reflection of any downturn in Asia's economic prospects.

"We're seeing some blowing off of some froth in the equity markets and that's probably a good thing," said Peter Morgan, regional economist at HSBC in Hong Kong.

Morgan likened the latest drop in stock prices to the correction in emerging market stocks that began in India last May. Stocks there dropped almost 30 percent, but had recovered mid-October along with the region's other markets.

"We don't think it has any major macroeconomic significance," he said of this week's tumble.

Chinese stocks, for example, had more than doubled in the year leading up to Tuesday's slide.

Citigroup also wrote in a research note: "While increased risk aversion may still have some room to go, we think the correction is unlikely to turn into a serious meltdown."
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