Asian stocks plunged the most in eight months, extending a global rout, as credit turmoil caused a debt-rating downgrade of American International Group and the collapse of Lehman Brothers Holdings.
Mitsubishi UFJ Financial Group slumped 7.7 per cent, leading the steepest decline by Japanese banks since 1987, on concern loan losses will increase. Babcock & Brown, among Australia’s biggest losers from the credit crisis, sank 34 per cent.
AIG, seeking funds to avoid bankruptcy, plunged 61 per cent yesterday in New York, part of the biggest tumble in the US stocks since September 2001. Nippon Mining Holdings lost 7.1 per cent as oil and copper dropped.
“You’re going to get a massive flight to safety,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $108 billion. “Banking stocks are guilty by association. There’s no place to hide because commodities were down quite sharply last night too.”
The MSCI Asia Pacific Index declined 4.55, or 3.9 per cent, to 111.06 at 7:21 p.m. in Tokyo, the biggest drop since January 22. All 10 industry groups fell on the measure, which was set for its lowest close since November 15, 2005. Japan’s Nikkei 225 Stock Average dropped 5 per cent to 11,609.72, its lowest since July 8, 2005. All Asian markets open for trading fell.
South Korea’s Kospi Index tumbled 6.1 per cent and index futures plunged, prompting a five-minute halt in program trading.
The country said it may provide more funds to help stabilise financial markets. Taiwan asked funds and banks to buy shares to boost the island’s equities.
Global rout
The Bank of Japan added 2.5 trillion yen ($24 billion) into the financial system, while China cut interest rates for the first time in six years as weakening exports dimmed the outlook for growth. Markets in Japan, China, Hong Kong and South Korea were shut for public holidays yesterday, when the MSCI Asia Pacific excluding Japan Index retreated 1.9 per cent.
US stocks tumbled, pushing the Standard & Poor’s 500 Index down 4.7 per cent, the most since the September 11, 2001, terrorist attacks. S&P 500 futures lost 0.4 per cent on Tuesday.
Lehman, the fourth-largest US investment bank, was forced into the biggest bankruptcy filing in history, becoming the latest victim of the subprime mortgage crisis.
At least seven Japanese banks lent a total of $1.62 billion, according to the Chapter 11 filing by Lehman.
