Asia Times Online


	September 18, 2001	atimes.com

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ASIAN MARKETS: Foretaste of gloom

Markets closed sharply lower as panicky investors dumped their holdings ahead of the resumption of trading on Wall Street later on Monday. Analysts said investors fear that the New York bourse, which has been closed since the terrorist attacks in the US last Tuesday, will plunge.

Tokyo crashed 5 percent to its lowest level for almost 18 years, Hong Kong shed 3.5 percent in thin trade and the Australian market fell 4.7 percent as investors wiped more than US$15 billion from their value.

Tokyo
The Nikkei-225 average of the Tokyo Stock Exchange lost 504.48 points to finish at 9,504.41, the lowest close since December 19, 1983. The broader capital-weighted Topix index ended 37.58 points or 3.63 percent lower at 996.45. A firmer yen has been an additional blow to Japanese stocks, weighing on major exporters such as carmakers Toyota and Honda. Blue-chip exporters were sharply down on the yen's firm bias and worries that the US economy might slow further. Honda Motor Co plummeted 10 percent to 3,850 yen while second-biggest Nissan Motor Co Ltd lost 12.2 percent to 539 yen. Toyota withstood the downturn, losing just 10 yen, or 0.3 percent, to 3,190 yen. Consumer electronics giant Sony Corp, another big exporter, dropped 7.9 percent to 4,210 yen. Japan's leading cell-phone carrier, NTT DoCoMo, was a rare standout, putting on 40,000 yen or 3 percent to 1.38 billion yen.

With no shortage of market disincentives, including the slowing US economy, rapidly falling dollar and rocketing crude oil prices, some 1,300 stocks fell, or about 90 percent of all issues traded on first section. Shares of companies in the automotive and aviation sectors dropped the most because of their closer links with the US economy. Some bank stocks plunged in the wake of the failure of Mycal Corp, which has increased the bad-loan burden of Mizuho Holdings Inc group. Mizuho Holdings fell 7.7 percent or 40,000 yen to 478,000 yen. The world's largest bank by assets on Saturday cut its group net forecast for the half year to September to a loss of 260 billion yen, from a 90 billion yen profit. The loss warning followed the collapse of debt-ridden retailer Mycal Corp., which filed for court protection from creditors last week. Dai-Ichi Kangyo Bank Ltd, a member of Mizuho, said it could no longer support the retailer. In all, Mizuho expects to write off 845 billion yen in bad loans for the first half of the year.

Hong Kong
Share prices in Hong Kong plunged 3.5 percent as investors awaited the re-opening of Wall Street, brokers said. The Hang Seng index slid 336.10 points to finish at 9,319.35. Hong Kong's largest airline, Cathay Pacific, led the losses. It dropped 10.1 percent to HK$6.25. But declines were across the board, with Hong Kong's market feeling its close ties to US stocks. The largest listing, multinational bank HSBC, fell 5.6 percent to HK$75.25. Telecoms were some of the rare gainers. China Mobile, the leading cell-phone company in mainland China, rose 1.2 percent to HK$21.70.

Even China's successful end to 15 years of talks to get into the World Trade Organization failed to offset the US negatives. China shares fell for a fourth straight day on Monday, with the Shanghai B share index down 4.82 percent to close at 152.50 while Shenzhen B shares were 5.81 percent lower at 256.20. B shares are the only class open to foreigners. China B shares fell about 10 percent last week in a three-day slide.

South Korea
Shares on the Korea Stock Exchange (KSE) fell to their lowest level in years as worries about the expected retaliation against terrorists by the US and the subsequent damage to the world economy induced buyers to shy away from the market altogether. The Korea Composite Stock Price Index (KSE) lost 13.53 points to close at 468.76. This is the lowest level posted since December 4, 1998, when the KSE languished at 466.38 and the country's liquidity crunch forced it to request International Monetary Fund assistance. Securities analysts said that investors, already jittery about a shooting war breaking out in the Middle East, were doubly troubled by purely economic indicators showing disappointing results, both in the American and domestic economies. The collapse of Asian markets in Japan and Hong Kong also darkened the gloom, setting off moves by the government and institutional investors to bolster the market.

In contrast, as crude oil price rises fueled fears of inflation, most investors cashed in their shares and left the market altogether. As a consequence, across the board losses were reported, with decliners overwhelming gainers 777 to 69 and 13 companies remaining unchanged. The KSE said that 231 shares fell to their daily limit lows. Institutional investors bought a net 66.6 billion won (US$51.3 million) worth of shares, though private and foreign investors were net sellers, dumping 82.7 billion won in stocks. Trading fell sharply to 727.99 million shares changing hands on a turnover of 1.69 trillion won.

Machinery, paper, transportation, medical supplies and securities fell off between 9 to 11 percent. The only noticeable gainers were the refineries and gas companies likely to benefit from higher fuel prices. As for bluechip companies, SK Telecom and Pohang Iron and Steel Co posted slight gains, while Samsung Electronics, Korea Telecom and Korea Electric Power Corp either lost ground or remained flat. "The only positive side is that with almost everyone having extricated themselves from the market, there could be a technical rebound and possibly some bargain hunting by some investors who might be interested in buying up depressed shares," said a dealer for LG Securities.

The over-the-counter Kosdaq market also broke new ground by falling even further than Friday's close, which was the lowest level ever. The market's index plunged 4.16 points to 46.05. Officials for the Kosdaq said that efforts by the government were having little effect and that the market was loosing its ability to regulate funds for startup companies under such circumstances. Daily turnover was off by nearly a third: 210.23 million shares as opposed to 350.14 million shares on Friday. The daily turnaround stood at 623.22 billion won. Share prices of 625 companies fell, 456 of those hitting daily permissible lows, with only 28 rising and four remaining static.

The government on Monday decided to introduce employee stock ownership plans (ESOP) and exchange traded funds (ETF) beginning in 2002 to help boost the stock market. At a meeting of economic ministers to cope with the aftermath of the "act of war" against the US, the ministers also agreed to consider easing the 25 percent investment limit imposed on the country's 30 top business groups.

ETFs are stock portfolios designed to track one specific index to permit institutional investors to follow index-related stocks in a safe manner. ESOPs are also expected to reinvigorate the stock market by allowing company owners and employees to launch a pool of investment money to purchase stocks in their own companies. The Bank of Korea in the meantime will operate its interest policy flexibly to help boost the sagging economy. Economic ministers also agreed to quickly specify at what level of assets the government will apply specific regulations to curb a chaebol's growth. They also decided to offer soon 4.6 trillion won of public funds to Seoul Guarantee Insurance Co, so it can repay debts to investment and trust firms. The government will have the Korea Development Bank issue 350 billion won worth of second collateralized bond obligations (CBO) on September 20 and expand the amount further to ease a credit crunch in the domestic financial market. It will also consider appropriating part of the 1.4 trillion won the Asian Development Bank and World Bank contributed to the fund for CBO and collateralized loan obligations.

Australia
Nervous investors wiped more than $A30 billion (US$15.5 billion) from the value of Australian stockmarket in anticipation of a massive sell-off of US stocks when Wall St reopens. Hopes of a confidence-boosting cut to interest rates by the US Federal Reserve ahead of the resumption of trading on Wall St did little to assuage expectations of heavy falls. Few sectors escaped unscathed with bluechip stocks among the hardest hit. After plunging more than 150 points to a 17-month low of 2942 points by early afternoon trade, the benchmark S&P/ASX200 recovered slightly to finish 145.5 points or 4.7 percent lower at 2955.3 points. The all ordinaries fell 145.4 points to 2895.4 points, taking falls since reaching record highs in late June to more than 16 percent. The all industrials index lost 265.7 points to 4965.1 points and the all resources index slipped 40.5 points to 1325.7 points. On the Sydney Futures Exchange, the September share price index contract was 145 points lower at 2967 - a 12.4 points premium to the ASX/S&P 200 - on a volume of 21,599 contracts.

Most bluechips were down, included big banks such as National Australia Bank (NAB) and media heavyweight News Corp. NAB lost 7.3 percent to A$25.41. News, which relies on the US for around 70 percent of its sales, fell 8.9 percent to A$12.41. Like airlines around the region, Qantas dived. Australia's largest carrier fell 13.6 percent to A$2.86. Gold stocks rose on the merger between producers Delta Gold and Goldfields.

Elsewhere
The Singapore market tumbled 4.7 percent, with jittery investors selling their stocks ahead of the reopening of the New York bourse. The Straits Times Index fell 65.85 points to close at 1,334.45.

Investors in Malaysia were also panicky, pushing the Kuala Lumpur market 5.5 percent lower. The KL Stock Exchange Composite Index plummeted 35.53 points to finish at 609. The broader Emas Index slumped 9.74 points to 142.78, the Industrial Index plunged 51.88 points to 1170.26, and the Second Board Index tumbled 13.06 points to 101.97. Falls outnumbered rises 887 to 12 while 14 counters were unchanged.

In India, Mumbai's Sensex dropped to an eight-year bottom in afternoon trade, hitting 2,644.56. That's its lowest level since November 1993. It then rallied slightly and was down 5.2 percent at 2,683.63 in late trade.

Prices in Manila were 4.7 percent lower at the close. The Philippine Stock Exchange composite index eased 58.31points to 1,178.11, the lowest finish since October 6, 1998.

Jakarta shares weakened 4.3 percent amid concerns about sharp falls on Wall Street when trading resumes, brokers said. The Jakarta Stock Exchange Composite Index slipped 18.403 points to close at 407.25.

In Bangkok, share prices eased 6.1 percent. The Stock Exchange of Thailand composite index fell 17.49 points to finish at 270.61.

In New Zealand, Air New Zealand shares slumped more than 40 percent after the collapse and grounding last week of its Australian subsidiary, Ansett. The NZSE Top 40 ended down 4.55 percent, or 85.43 points, at 1,790.31.

The market in Taipei was closed after the northern part of Taiwan was lashed by Typhoon Nari.

(Asia Times Online/Asia Pulse)