NEW YORK Sept 2 — Markets in Asia, struggling in recent days and responding to the battering of financial shares on Wall Street, opened lower today, led down by Japan’s Nikkei 225 index, which was off 2.7 per cent by midday.
The Kospi index in Seoul was down 2 per cent in early trading, and the S&P/ASX 200 index in Sydney was lower by 1.9 per cent. China’s principal exchange, in Shanghai, opened marginally lower, although it recovered during the morning and was up 0.5 per cent at noon. The Hang Seng index in Hong Kong also was 1.5 per cent lower at midday, and the MSCI Asia Pacific Index slumped 1.6 per cent.
Following the sell-off of US financial stocks, Mitsubishi UFJ Financial Group, the largest publicly traded bank in Japan, was off 2.5 per cent in the first hour of trading in Tokyo, while Mizuho Financial Group fell 2.7 per cent.
Asian equities have foundered recently on worries that Chinese authorities may take steps to rein in lending. But the region had some good news today as the Australian government’s Bureau of Statistics reported that the gross domestic product grew 0.6 per cent for the second quarter compared to the second quarter of 2008. The increase was markedly higher than expectations, and economists attributed the bounce to accelerated consumer spending.
The market declines in Asia followed a rough day on Wall Street, where pessimistic voices have recently been warning that stock prices were becoming too expensive.
And investors have been listening, as evidenced by yesterday’s declines. Sellers walked away from the financial sector, with national banks and regional banks, insurance firms and online brokerages leading the way down. All but one of the Dow’s 30 blue-chip stocks, Wal-Mart, were lower in the last hour of trading.
Financial stocks have been some of the biggest winners of Wall Street’s recent rally, but analysts have warned that the gains may have outpaced reality. Banks, they say, still face big losses as mortgage delinquencies rise and credit card holders default on their loans.
For Wall Street, it was a third consecutive day in the red and its worst daily performance since mid-August, leaving some investors to wonder whether a summertime rally was beginning to fade.
The Dow Jones industrial average lost 185.68 points, or 1.96 per cent, to 9,310.60, while the broader Standard & Poor’s 500-stock index fell 2.2 per cent, or 22.58 points, to 998.04. The Nasdaq was off 2 per cent, or 40.17 points, to 1,968.89.
It was an odd day for the markets to lose their footing: a new report on the manufacturing sector showed that American factories were growing for the first time in more than a year and a half. And a real estate group reported that pending home sales had surged to their highest level since 2001, when the group began tracking the numbers, as buyers returned to the housing market.
President Obama hailed the manufacturing numbers as a sign the economy was pivoting, saying that things were “heading in the right direction, and that the steps we’ve taken to bring our economy back from the brink are working.”
Analysts say the global economy is stabilizing and the big banks are no longer poised to collapse, but many are still expecting a market correction as autumn approaches.
The slide in stocks seemed true to form for the first day of September, traditionally Wall Street’s worst month. Last September, the collapse of Lehman Brothers upended the financial world, precipitating huge drops in stock markets and a crisis of confidence that transformed the financial system.
“The market is failing to rally on positive economic news,” said Anthony Conroy, head equity trader at BNY ConvergEx Group, who added that light trading volumes contributed to the rocky moves on Tuesday. “We’re seeing a change in the market direction that is breeding nervousness, and that nervousness is breeding volatility.”
Shares of the American International Group, the insurance giant, fell 20.6 per cent as investors and analysts expressed doubts about A.I.G.’s finances and the strength of its stock price. In addition, Sanford C. Bernstein & Company downgraded A.I.G., whose stock surged this summer but has fallen to US$36 (RM112) from US$50 in the last two days.
Most other big banks were also swimming in red. Shares of Citigroup fell 9 per cent while Bank of America fell 6.4 per cent; Wells Fargo, 4.8 per cent; and Morgan Stanley, 5.2 per cent. And the CIT Group, the struggling commercial lender, fell 15.5 per cent to US$1.47 a share. — NYT
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