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TOKYO - Asian stock markets suffered a fresh mauling Monday with Tokyo plunging to a four-year low on growing doubts about whether a Wall Street bailout package can stem the global financial crisis.
Investors were spooked by signs of escalating problems in Europe after Germany's fourth biggest bank had to be rescued over the weekend. The yen soared as investors unwound risky bets.
Tokyo's Nikkei-225 index ended down 4.25 per cent as Sydney lost 3.3 per cent
and Seoul tumbled 4.3 per cent. Shanghai closed down 5.23 per cent while Hong Kong ended 4.7 per cent lower.
"The market is not convinced that the US bailout package can protect the economy from the financial crisis," said Toyo Securities strategist Ryuta Otsuka.
In an effort to keep credit flowing, Japan's central bank pumped emergency funds into the short-term money market for a 14th straight business day, pouring in 1.0 trillion yen (9.5 billion dollars) in the morning.
Investors dumped shares after US stock markets fell sharply Friday, despite US congressional approval of a 700-billion-dollar bank bailout.
Dealers said the declines reflected worries that the plan would not be a panacea for the broad economic and banking woes in the United States.
Underscoring the worsening conditions in the world's largest economy, 159,000 US jobs were lost in September, according to government figures.
"The approval of the financial rescue plan failed to bolster market confidence. Pessimism towards the global economy is running deeper," said Young Wang, an analyst at Yuanta Securities Investment Consulting in Taipei, where stocks ended down 4.1 per cent at a four-year low.
As the US-born financial crisis takes a stronger grip in Europe, the German government agreed an emergency rescue package of 50 billion euros, or 68 billion dollars, for Hypo Real Estate (HPE), late Sunday before markets opened in Asia.
It also announced an unlimited guarantee for personal savings deposits.
France's BNP Paribas meanwhile announced Sunday that it was taking control of the operations of ailing financial group Fortis in Belgium and Luxembourg.
The leaders of France, Germany, Italy and Britain vowed over the weekend to protect fragile banks but did not discuss a European financial rescue package.
Given the various economic conditions in each of the eurozone member countries, "it looks difficult for authorities to take dramatic and quick action like the US," Barclays Capital analysts wrote in a note to clients.
Markets were looking ahead to a meeting Friday of finance chiefs from the Group of Seven rich nations, waiting for any announcements on coordinated action such as liquidity injections or interest rate cuts, dealers said.
A speech Tuesday by US Federal Reserve Chairman Ben Bernanke will also be closely watched for any clues on the possibility of a US interest rate cut.
On the foreign exchange market, the yen surged against other major currencies as speculators unwounded risky investments funded with cheap Japanese credit.
At one point the dollar touched 102.85 yen, its weakest since May 22, down from 105.27 late Friday in New York.
The euro fell to a 13-month low of 1.3610 dollars, down from 1.3781 in New York, while the euro slipped to 140.58 yen from 145.16.
"Players see the yen as a less risky currency as the market is full of suspicion," said Yosuke Hosokawa, head of Chuo Mitsui Trust Bank's forex group.
"No one seems ready to take risks under the current circumstances."
- AFP/ir
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