World bourses suffer major freefall anew

10/09/2008

Global stocks plunged to new depths in the financial vortex yesterday with London shares down nearly six percent after the Tokyo market came unhinged with its worst fall for more than 20 years.

The benchmark world equity index hit four-year lows as recession concerns and a lack of globally coordinated action to stem the credit crisis hit investor morale, say analysts.

In the local front, share prices closed 4.8 percent lower while the peso closed at another low for the year at 47.75 per dollar from 47.40 the other day.

The composite index fell 116.45 points to 2,307.74 points, while the all-shares index fell 3.99 percent to 1,472.74 points.

There were 14 gainers compared to 113 losers with 21 unchanged. Turnover totalled 2.408 billion shares worth P2.372 billion.

“We’re tracking Wall Street just like everybody else, hit by the nervousness exported by the US,” Lawrence de Leon of Accord Capital Equities told Dow Jones Newswires.

Investors largely ignored Tuesday’s inflation report which showed consumer prices eased in September after hitting a 17-year high in August.

“It is still not the right time to celebrate,” said Unicapital Securities in a research note.

“With inflation showing signs of easing, economic growth and stability in this market condition need to be addressed,” it said.

London briefly slumped more than seven percent in early trading, despite the British government announcing a part-nationalisation of the country’s eight main banks in a broader bailout package worth up to $875 billion.

The government said it would use 50 billion pounds (€64 billion, $87 billion) of taxpayers’ money to buy major stakes in the banks, which include Royal Bank of Scotland, HSBC and Barclays.

The three-part package also makes available 200 billion pounds in short-term loans and the government will issue 250 billion pounds to guarantee loans between banks.

“These sorts of measures aren’t working anymore,” said Hiroichi Nishi, a broker at Nikko Cordial. “It’s like you’re trying to pump blood into a heart with clogged arteries.”

From Hong Kong to Paris, Singapore to Frankfurt, investors dumped shares as fears grew that policymakers may be powerless to stop the worst global financial shock since the Great Depression.

“Equity market retrenchment continues with stocks being sold off on a global basis,” said CMC Markets dealer Matt Buckland.

In a dramatic day on fear-stricken markets, Tokyo plummeted 9.38 percent by the close, the biggest loss since October 1987 in the wake of the “Black Monday” crash in the United States.

Hong Kong ended down 8.2 percent at its lowest level in more than two years.

The bloodbath forced some countries to take dramatic steps to try to stem the selling. Indonesia suspended trading on its market after stocks plunged more than 10 percent.

Trading was later frozen on Russia’s two main stock markets after plunges of more than 11 percent on opening.

Elsewhere in early European trade, London recovered slightly to post a loss of 5.58 percent, Franfurt lost 6.72 percent, Paris dived 8.18 percent and Madrid tumbled 5.41 percent.

“No one wants to take risks right now,” said Hirokazu Fujiki, a strategist with Okasan Securities. “There’s no near-term bottom in sight.”

He said the market was “pressuring monetary authorities to take coordinated action, notably joint interest rate cuts,” ahead of a meeting of top world finance chiefs in Washington on Friday.

Sydney closed down 5 percent on Wednesday, Seoul lost 5.81 percent and Shanghai shed 3.04 percent as the crisis sparked by a US housing slump continued to send shockwaves around the globe.

The latest plunge came after Wall Street’s Dow Jones Industrial Average sank more than 500 points or five percent on Tuesday to a five-year closing low.

In foreign exchange trading, the dollar slumped below 100 yen for the first time in six months as investors flocked to the Japanese currency as a haven.

“No one knows for certain now what they can rely on,” said Hironobu Hagi, deputy general manager at capital market division of Shinsei Bank.

“We’re seeing panic selling. Once players see a sign of selling, everybody tries to jump on the bandwagon,” he said.

Global central banks meanwhile pumped billions of extra dollars into the financial system while the Hong Kong Monetary Authority said it would cut its key interest rate by 100 basis points from Thursday.

The Bank of England was beginning its latest monthly policy meeting, with markets widely expecting a cut to British interest rates of at least a quarter-percentage point on Thursday.

The US Federal Reserve said Tuesday that it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and fight off the liquidity crunch triggered by a wave of US mortgage defaults.

But markets took little comfort from the latest measures. Wall Street’s Dow Jones index sank 5.11 percent to a five-year closing low on Tuesday.

Federal Reserve chairman Ben Bernanke hinted that there could be a US interest rate cut soon as the outlook for economic growth worsened.

“In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate,” Bernanke said.

In the Middle East, stock markets plunged again Wednesday, with Riyadh down more than 7.5 percent ahead of the close.

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