TOKYO, September 30 – Stocks plunged in Asia Tuesday as fears of escalating financial turmoil triggered panic selling on world markets after Washington policymakers unexpectedly shot down a US financial rescue plan.,
In Tokyo and Hong Kong stocks were some five percent in the red despite calls from policymakers for markets to keep their cool after a record plunge on Wall Street.
The shock rejection by Congress of the 700-billion-dollar bailout package raised fears of a deepening of the financial and economic turmoil that has rocked global markets and brought down some of the world\’s top banks.
Investors rushed to dump equities and move into safe havens such as bonds and gold.
In Tokyo the Nikkei plunged by almost five percent to hit a three-year low, before clawing back slightly.
Hiroichi Nishi, equities chief at Nikko Cordial Securities, said he had been shocked by the rejection of the package by Congress.
"The market is exploring where the bottom is now," he said, adding that all eyes were on whether the US House will vote on the rescue plan again or the White House will come up with new measures.
In India shares fell 3.51 percent within minutes of opening on Tuesday with the BSE benchmark 30-share Sensex index falling 442.2 points to 12,153.55 in early dealings.
Hong Kong share prices opened down 5.6 percent. Taipei lost 6.2 percent, while Seoul slumped five percent before pulling back to end 2.9 percent off at midday. Sydney tumbled more than five percent at one point before recovering some of the losses.
Overnight on Wall Street, the Dow Jones Industrial Average sank 777.68 points or 6.98 percent to close at 10,365.45 in its biggest single-day point decline ever.
The slide eclipsed a 684-point drop on September 17, 2001, when the markets reopened following the September 11 terror attacks. In percentage terms, the blue-chip drop was the 17th worst on record.
"Markets need certainty and stability, but at the moment markets are dysfunctional. Everyone is confused and wondering what will happen next," ANZ Bank chief economist Cameron Bagrie in Wellington told Dow Jones Newswires.
Japan\’s economic ministers voiced hope that the United States would take action to halt the Wall Street meltdown.
The financial woes "will likely greatly affect the world economy, and we hope that the US will reach an appropriate conclusion on the solution," Kaoru Yosano, the minister for economic and fiscal policy, told reporters.
Finance Minister Shoichi Nakagawa separately called on Japanese markets to be calm, saying Japan\’s financial sector was in better shape than US and European banks ravaged by high-risk subprime loans.
As stocks plunged, Japan\’s central bank injected two trillion yen (19.2 billion dollars) of emergency funds into the Tokyo money market to try to calm the renewed financial turmoil.
It was the 10th consecutive business day that the Bank of Japan (BoJ) has pumped cash into the domestic financial system to try to keep credit flowing.
Markets were seeing "a return to the state of extreme turmoil seen up to the time the US government proposed" the plan to buy up toxic debts from struggling banks, Barclays Capital analysts wrote in a note to clients.
"With the US dollar falling in value, we could potentially see speculation that major central banks, including the BoJ, will implement coordinated (interest) rate cuts at some point," they added.
The US Federal Reserve and other major central banks nearly doubled swap lines to 620 billion dollars on Monday.
In the US, Citigroup agreed to take over the banking operations of Wachovia in a deal that gives the government a stake in one of the nation\’s largest banks, highlighting the ongoing woes of the sector.
World oil prices fell further in early Asian trade, following a nearly 10 percent drop in New York as traders bet that demand for energy will ease due to the escalating economic and financial turmoil.
New York\’s main contract, light sweet crude for November delivery, shed 18 cents to 96.19 dollars a barrel.
The euro was under pressure after the rescue of several European banks deepened worries about the region\’s banking sector.
The euro stood at 1.4362 dollars in early Tokyo trade, down from 1.4432 late on Monday in New York.
Increased risk aversion benefited the yen, which rose against the dollar in US trade. The greenback was at 104.06 yen here, against 104.03 in New York late on Monday.