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HONG KONG: Asian stock markets plunged Tuesday after the collapse of Lehman Brothers caused a meltdown on Wall Street, as governments held emergency meetings to stave off a wider financial crisis.
Hong Kong shed 5.9 per cent in the morning and Tokyo dropped 5.1 per cent, as trading screens across the region went red on the heels of the biggest one-day point loss for the Dow Jones since the September 11 terror attacks.
Officials appealed for calm, trying to avert a public panic and urging investors not to over-react to the drop, which comes after months of market turmoil set off by worries over US subprime, or high-risk, housing loans.
But the bankruptcy filing by Lehman, a US banking institution that had survived even the 1929 stock market crash in the Great Depression, intensified worries about the seemingly endless fallout from the subprime mortgage fiasco.
"We're in the middle of a crisis," said YK Chan of Phillip Asset Management in Hong Kong.
US Treasury Secretary Henry Paulson vowed Monday to ensure "stability and orderliness" at home and overseas, but markets across Asia found no solace after news that two Japanese banks were among Lehman's biggest lenders.
Aozora, one of those banks, lost almost 18 per cent of its share value by mid-day.
Meanwhile Lehman's Japanese unit was reported to have the second-largest liability of any bankruptcy filing in post-war Japan.
Government officials held an emergency meeting with Bank of Japan (BoJ) governor Masaaki Shirakawa.
The BoJ injected US$24 billion into money markets to try to calm the turmoil.
Australia's benchmark index was off 2.6 per cent at midday. Prime Minister Kevin Rudd met with the treasury officials and the head of the Reserve Bank of Australia.
Rudd told parliament the government was "acutely conscious" that the turmoil was not over. "As events in the US have demonstrated in the last 24 hours, regrettably, there is a long way to run yet," he said.
In South Korea, share prices were down 5.4 per cent in early trade and the currency, the won, was down three per cent against the dollar. The central bank said it would intervene on the foreign exchange market if necessary.
South Korean economic and financial chiefs met to consider their next move, with some looking for a silver lining amid the slew of negative news.
Vice Finance Minister Kim Dong-Soo told reporters before the meeting that Lehman's collapse could be positive for global markets by "quickly removing market instability."
His remarks echoed Paulson, who on Monday insisted that "market discipline" - in other words, letting failing institutions fail - needed to be part of the US response to the crisis.
But earlier this month he ordered the US government's takeover of US mortgage giants Freddie Mac and Fannie Mae, and on Monday he reiterated that the US housing mess was "the root" of the current troubles.
The blue-chip Dow Jones Industrial Average dropped 4.4 per cent on Monday, its largest one-day point loss since the re-opening after the September 11 attacks in 2001.
American International Group (AIG), one of the world's biggest insurance companies, slid 60.8 per cent - and could now be facing the end after three major credit agencies lowered their ratings for the firm.
Meanwhile Merrill Lynch got a lifeline with a US$50 billion takeover deal from Bank of America in a move aimed at easing market worries. Shares in Bank of America fell 21 per cent.
European markets were also sharply affected on Monday. London's FTSE 100 index slumped 3.9 per cent, the CAC 40 in Paris lost 3.8 per cent and in Frankfurt the DAX shed 2.7 per cent.
Hong Kong said it would ensure orderly market trading as shares tumbled sharply, and Financial Secretary John Tsang said he was not worried about the health of other institutions in the financial hub.
"We have a comprehensive regulatory regime, so I'm not too worried," he
said.
Markets across the region were hit hard. Taipei shares were off 4.7 per cent, Jakarta opened down 6.5 per cent, Shanghai was down 4.1 per cent, and Singapore dropped 2.2 per cent in the morning session.
Philippine share prices closed down 4.5 per cent, the sharpest one-day fall in Manila since January.
- AFP/yb
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