Asia-Pacific stocks nosedive after Fed cut


Tokyo : Stocks across the Asia-Pacific nosedived Monday along with the US dollar as investors worried that the credit crisis is worsening after JP Morgan Chase and Co agreed to buy US investment firm Bear Stearns and the US Federal Reserve cut its lending rate to banks.

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The biggest losses were seen in India and Hong Kong, but Tokyo was close behind as an upsurge in the yen added to the downward pressure, sending the Nikkei 225 Stock Average below 12,000 and to its lowest level since August 2005.

The benchmark Nikkei closed at 11,787.51, down 3.71 cent, while the broader Topix index of all first-section issues also tumbled 3.65 percent to 1,149.65.

The yen rose to its highest level against the dollar since August 1995, weakening the value of exporters’ goods in Japan’s largest export market. Exporters, such as Mazda Motor Co and Sony Corp, led losses, as did financial firms.

In Hong Kong, whose own dollar is pegged to the US greenback, making its economy more sensitive to US economic developments, the Hang Seng closed down 5.18 percent at 21,084.61.

The index traded 10,000 points lower than its peak of almost 32,000 of late October, prompting the chief executive of the Hong Kong Monetary Authority, Joseph Yam, to appeal for calm.

He said he did not believe the US downturn would have a long-term effect on the Hong Kong market but predicted a period of volatile trading and appealed to investors to reign in their appetite for risk.

Financial issues, such as Australia’s Babcock and Brown Ltd and Japan’s Mitsubishi UFJ Financial Group Inc, were the hardest hit around the region, where Australia’s ASX 200 Index was down 2.3 percent to 5,087, South Korea’s Kospi index fell 1.61 percent to 1,574.44 and Singapore’s Straits Times Index took a 1.63 percent drop to 2,792.45.

In Beijing, central bank chief Zhou Xiaochuan said there was room for an interest-rate hike, which sent mainland issues plummeting – the Shanghai Composite Index to its lowest level in eight months.

In mainland China, the CSI 300 Index, which tracks yuan-denominated A shares listed on the mainland’s two exchanges, fell 4.63 percent to 3,965.28 while the Shanghai Composite Index was down 3.6 percent to 3,820.05 and the Shenzhen Composite Index drooped 6.34 percent to 1,158.89.

The tumbles came after the US Federal Reserve, in an emergency meeting Sunday, cut its lending rate to banks by a quarter of a percentage point to 3.25 per cent in a bid to help inject cash into financial institutions and bolster an economy hit hard by defaults on home mortgages and a tightening credit market.

It also announced the creation of a lending facility to make short-term loans to financial institutions.

In another development, the US bank JP Morgan Chase was to buy investment firm Bear Stearns for $2 per share after bailing out the company days earlier, the companies said Sunday.

The $240 million deal comes after a shortage of cash forced Bear Stearns to seek short-term financing from the Federal Reserve through JP Morgan Chase Friday after clients pulled $17 billion from Bear Stearns over two days, the Bloomberg financial news reported.