Asian Investors Rattled by Dow’s Plunge

Asian Stocks Tumble in Wake of Wall Street’s Plunge; Nikkei Down 2.4 Percent

By Mari Yamaguchi, Associated Press Writer

Friday July 27, 4:23 am ET

TOKYO (AP) — Asian markets tumbled Friday in the wake of one of Wall Street’s biggest losses of the year, with Japanese stocks also taking a hit on the yen’s recent strength and uncertainty over weekend elections.

Markets in Hong Kong, Australia, South Korea, Taiwan, Singapore, Malaysia and the Philippines also fell sharply. Mainland Chinese stocks, however, remained flat.

Investors were rattled after U.S. markets plunged Thursday amid worries over the U.S mortgage and corporate lending markets. Those woes could cause global liquidity to dry up as international investors pull out of riskier assets, including Asian emerging markets, analysts said.

“If big foreign funds have selling orders, they tend to go by region. If they sell Asia funds, they do it to reevaluate portfolios or cover losses in the U.S.,” said Rommel Macapagal, chairman of Westlink Global Equities

“But for local investors, it’s a sentiment. When big drops occur, they tend to get jittery because of expectation of foreign funds selling. They tend to get out,” he said.

In Tokyo, the Nikkei 225 index sank 418.28 points, or 2.36 percent, to close at 17,283.81 — nearly a three-month low. Losers included Honda Motor Co., Toshiba Corp. and Nikon Corp.

Philippine stocks suffered their biggest percentage drop in 10 years, sinking 3.9 percent. Taiwan’s benchmark index fell even more, dropping 4.2 percent.

The sell-offs also came after stunning rallies in Asian markets — stocks in South Korea, China and India hit records just this week — and some investors viewed Wall Street’s drop as a good opportunity to sell and lock in their profits.

South Korea’s benchmark index dropped 4.1 percent, its biggest drop in more than three years. In afternoon trading, Hong Kong’s Hang Seng index was down 1.9 percent, while Indian shares fell 3 percent in morning trading.

Chinese markets, however, shrugged off the declines. The benchmark Shanghai Composit Index slipped just 0.03 percent after hitting an all-time record high on Thursday.

In Tokyo, Japan’s Chief Cabinet Secretary Yasuhisa Shiozaki, brushed off concerns about the influence of the U.S. stock market on Japan’s economy. The Dow Jones industrial average plunged 311.50 points, or 2.26 percent, Thursday to 13,473.57, its biggest point drop since Feb. 27.

“The Japanese economy is expanding stably and I have not heard that there have been any major fluctuations in other key countries,” Shiozaki said.

Investors in Japan were also unnerved by the yen’s recently appreciation against the dollar, which erodes overseas income at the country’s key exporters. The dollar fell to 118.70 yen in afternoon trading in Tokyo, down from 119.46 yen late Thursday in New York.

“A stronger Japanese yen has a greater impact on today’s Nikkei than overnight losses on U.S. stocks,” said Hiroyuki Fukunaga, chief strategist at Rakuten Securities.

There was also anxiety in Japan about Sunday’s upper house elections. Recent newspaper polls have predicted that the long ruling Liberal Democratic Party could win fewer than a third of the seats contested in Sunday’s upper house elections.

A defeat would not immediately threaten its hold on power, but Prime Minister Shinzo Abe could face pressure to resign from other leaders within his party and from the public.

Associated Press Writer Hrvoje Hrjanski in Manila contributed to this report.