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TOKYO: Asian stocks were pummelled again Wednesday as fears grew that policymakers may be powerless to stop the worst global financial crisis since the Great Depression.
US and European authorities launched fresh initiatives Tuesday to try to ease a global credit crunch, but the moves failed to boost market confidence as Wall Street and other stock markets sank to new lows.
"These sorts of measures aren't working anymore. It's like you're trying to pump blood into a heart with clogged arteries," said Hiroichi Nishi, a broker at Nikko Cordial.
Japan's Nikkei-225 index plunged 4.5 per cent, hitting a five-year low. Stocks tumbled 5.1 per cent in Hong Kong, 4.1 per cent in Sydney, 2.8 per cent in Singapore and 2.9 per cent in Shanghai.
As the crisis deepened in Europe, Britain was set to announce a rescue package for its ailing banking industry before markets opened on Wednesday, officials said, after key bank shares tumbled 40 per cent.
The central banks of Japan and Australia pumped more emergency funds into the financial system while the Hong Kong Monetary Authority said it will cut its key interest rate by 100 basis points from Thursday.
The US Federal Reserve said it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and fight off the liquidity crunch triggered by a wave of US mortgage defaults.
But markets took little comfort from the latest measures. Wall Street's Dow Jones index sank 5.11 per cent to a five-year closing low.
"Everyone is looking for a silver bullet but we just have to ride it out," Adrian Vance, a broker at Hamilton Hindin Greene in New Zealand, told Dow Jones Newswires.
The dollar was steady as measures by central banks to shore up confidence in the global crisis failed to reassure the markets, dealers said.
European and Asian shares had seen some bright signs the day before, including a hefty rate cut in Australia. But few market watchers were ready to call a bottom to the crumbling markets.
"I don't think we've seen capitulation yet. The boost from the Australian interest rate cut didn't last long and the problems in the US and the eurozone remain big worries," said Westcomb research head Goh Mou Lih in Singapore.
Japan's Nikkei index has plunged 27 per cent since the start of August. This month alone it has lost about 14 per cent so far.
Federal Reserve chairman Ben Bernanke hinted that there could be a US interest rate cut soon as the outlook for economic growth worsened.
"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," Bernanke said.
Nikko Cordial's Nishi said that the US government would need to inject funds directly into banks to help them enhance their capital base.
"The market is watching whether the United States can bring its financial system back to normal," he said.
European stock markets ended mixed Tuesday, with Paris and London perking up and Frankfurt slipping back, a day after they sustained huge losses due to mounting worries about the vulnerability of Europe's banking industry.
In the Middle East, stock markets plunged across the Arab world, with billions of dollars wiped off the value of shares.
- AFP/yb
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