Asian Markets Tank, Hong Kong Plunges 6%

By CNBC.com
05 Feb 2008

http://www.cnbc.com/id/23017287

Asian markets tanked in the afternoon session Wednesday, sending investors fleeing to less risky bonds, after unexpectedly weak service sector data in the United States and Europe fueled fears of a recession. Japan was down over 4 percent and Hong Kong plunged 6 percent.

Concern that the U.S. economy is heading for a downturn flared up again after data showed the U.S. services sector slowed in January to levels not seen since the 2001 slump. This sent the Dow Jones Industrial Average plummeting 370 points, or 2.9 percent on Tuesday, its biggest one-day percentage drop in nearly a year. The Nasdaq skidded 73 points, or 3.1 percent, while the S&P 500 tumbled 44 points, or 3.2 percent.

Worries about the fate of U.S. bond insurers also contributed to the selloffs, despite talk of various rescue plans, after Standard & Poor's on Tuesday warned the ratings of U.S. banks could be at risk.

Markets in China, Taiwan and South Korea are all closed for the Lunar New Year holiday, while the Hong Kong and Singapore exchanges are only open for a half day of trade.

They fell more than 4 percent, led by banks and exporters such as Honda Motor on growing fears of a U.S. recession and a spate of outlook cuts by Japanese companies. Mitsubishi UFJ Financial Group, Japan's No.1 bank, fell over 4 percent as banks came under pressure.

Australian shares fell 3 percent on twin worries of a U.S. recession and higher domestic interest rates, while BHP Billiton fell after announcing a formal offer for Rio Tinto. Shares in Macquarie Group plummeted over 8 percent, after the Australian investment bank named Nicholas Moore as its new chief executive, and reiterated it had no unusual trading exposures arising from the global credit market turmoil.

Hong Kong blue-chip shares dived 6 percent as nervous investors, tracking losses on overseas bourses, cashed out of the market ahead of the Lunar New Year break. Investors were focusing on Aluminum Corp of China, which fell 8.3 percent after news that parent Chinalco and its partner Alcoa were studying BHP's $147 billion bid for Rio Tinto. Singapore's FTSE Straits Times Index shed almost 4 percent led by losses index heavyweight SingTel and financials such as top lender DBS Group and SGX. But shares of steel coil producer Delong Holdings rose as much as 14 percent after the firm said its largest shareholder has been approached by "certain parties" to buy its stock.