Asian markets hurt by Wall Street's woes

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The Independent Online

Stock markets in Asia fell sharply today, in the wake of yesterday's slump in US share prices.

Stock markets in Asia fell sharply today, in the wake of yesterday's slump in US share prices.

The losses were particularly heavy in Japan, where concern is high over how a fragile government will deal with weaknesses in the world's second-largest economy.

One day after Japan learned that its deeply troubled economy had narrowly avoided a recession late last year, Finance Minister Kiichi Miyazawa, said: "The economy itself is certainly in a state of deflation. There is no hiding that fact."

That grim news was obvious on Japan's benchmark 225-issue Nikkei Stock Average, which hit a new 16-year low today. It closed down 351.67 points, or 2.89 percent, at 11,819.70.

Some of the biggest losers at Noon included Sony, down 2.5 percent; electronics company NEC, off 6.9 percent; and Nippon Telegraph and Telephone, Japan's biggest telecommunications company, down 3.9 percent.

"The US market is there, but I think the sell-off today is due to the problems in Japan," said Susumu Kato, a bond strategist at Lehman Brothers Japan. "The banking sector problem has gotten more serious, and the feeling is that the government won't take effective action. The problems are structural, political and economic," he said in an interview.

Japan is trying to pull out of its worst economic slowdown since World War II, and it also is struggling with political immobility.

Yesterday, the government reported that the gross domestic product grew 0.8 percent in the fourth quarter of 2000. The figures mean the government will almost certainly achieve its goal of 1.2 percent economic growth in the fiscal year ending March 31. But many officials were not comforted by the report, noting that consumption dwindled in the quarter, and that suggestions of a general downturn are visible in monthly indicators released since then.

Over the weekend, Prime Minister Yoshiro Mori, Japan's most unpopular leader in decades, was widely reported to have agreed to step down soon. But he denied that two days later, setting off a storm of criticism and deepening concerns over a political vacuum in the country.

Other financial markets in the Asia-Pacific region also fell sharply this morning, thanks to Wall Street, where the Nasdaq composite index fell 6.3 percent on Monday to close below 2,000 points for the first time in 27 months. The Dow Jones industrial average dropped more than 400 points, or 4.1 percent. One reason was a series of warnings from high-tech companies in the United States, where the main bourses have been suffering from bearish sentiment for months.

The tech-heavy Nasdaq index is now down nearly 62 percent from the closing high it reached a year ago, and the selling spilled over to blue chips that had earlier escaped investors' fury.

In Seoul, the Korea Composite Stock Price Index closed 17.08 points, or 3.13 percent, lower at 527.97. "It's mainly a chain reaction linked to Wall Street," said Lee In-ho, an analyst at SK Securities Co.

In Hong Kong, the blue-chip Hang Seng Index opened 3.3 percent lower, and by the afternoon it was trading down 392.96 points, or 2.85 percent, at 13,383.76.

Property and banking companies suffered the most. Banking bellwether HSBC Holdings dropped 4.2 percent, and property giant Sun Hung Kai Properties was down 6.6 percent.

Antony Mak, director of the sales at Vickers Ballas, told Radio Hong Kong that profit warnings by American high-tech companies mean that hopes for a U.S. recovery are fading.

Hitting a new low for the year 2001, Singapore's benchmark Straits Times Index was down 3.65 percent, or 67.51 points, to 1,782.33 at midafternoon.

In addition to Wall Street's woes, traders said, a profit warning from telecommunications-equipment maker LM Ericsson, which is based in Sweden, unnerved Singapore investors. Components for a lot of Ericsson's telephone handsets are made in the city-state. That was clear on the Straits Times in Index, where Chartered Semiconductor Manufacturing shares were down 2 percent, Gul Technologies Singapore's off 4 percent, and MMI Holdings' down nearly 5 percent.

"Ericsson's profit warning is simply the latest in a series of warnings from other telecommunications companies such as Lucent and Nortel, and it confirms peoples' worst fears about the industry," said Manish Singhai, a regional fund manager with Alliance Capital Management in Singapore.

In Australia, the Sydney Stock Exchange's benchmark All Ordinaries index closed down 54.4 points, or 1.7 percent, at 3,211.4, its worst one-day fall since Dec. 21, 2000.

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