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17.09.2001, 14:23

Sharp declines in Tokyo, Hong Kong seen forecasting U.S. selloff

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Asian stocks end lower

Sharp declines in Tokyo, Hong Kong seen forecasting U.S. selloff

September 17, 2001: 4:33 a.m. ET

SINGAPORE (Reuters) - Stock markets across Asia slumped Monday as investors waited with foreboding for Wall Street's verdict on what last week's numbing terror attacks will mean for the U.S. and global economy.

Despite talk of a patriotic rally, brokers in Asia said prices could fall at least 5 percent when the New York Stock Exchange resumes trading at 9:30 a.m. ET (1330 GMT) after its longest close since the Great Depression.

"An initial selling spree could send the New York market reeling by 5 to 10 percent," said Hiroichi Nishi, general manager of the products group at Nikko Securities in Tokyo.

The dollar remained under pressure, falling to a six-month low against the euro, but won a reprieve against the yen after Japan's monetary authorities strode into the foreign exchange markets to buy dollars.

European shares opened lower after a sharp selloff Friday.

In Asia, the mood was decidedly gloomy.

"The Dow Jones industrial average could fall to 8,500," said Craig James, chief economist at Commonwealth Securities in Sydney, after Australian shares shed 4.7 percent.

The Dow closed at 9,605.51 last Monday, the eve of suicide aircraft attacks on the World Trade Center in New York that shattered America's financial capital and, many economists fear, will do the same to the confidence of U.S. consumers.

"After today's action you'd say that they would be calling Wall Street down 400 to 500 points," was the guess of Brett Wilkinson of New Zealand brokers DF Mainland in Wellington.

Nikkei at 17-year low

With investors pricing in a global recession, Japan's Nikkei blue-chip index fell 5.04 percent to 9,504.41, its lowest level since December 1983. Hong Kong's Hang Seng index finished 3.5 percent lower at 9,319.35.

Airline and insurance stocks led the retreat.

Even Chinese investors, who routinely shrug off outside events, have been gripped by uncertainty over the economic and political fall-out from the devastating attacks, which killed around 5,000 people.

The Shanghai B share index tumbled over six percent.

"The markets were reacting in advance to possible falls on Wall Street after it reopens on Monday," said Zheng Weigang, a senior analyst at Shanghai Finance Securities. "There were also widespread worries over possible escalation of military action around the world."

Taking their cue from falls of more than five percent in Europe on Friday, Japanese stocks tumbled to lows not seen in nearly 18 years.

Steep losses in bank shares following the collapse of Japan's fourth-largest retailer added to Tokyo's gloom, as did fears that the dollar will fall further, making life even harder for carmakers and other big exporters.

In an effort to stabilize the foreign exchange markets, Japan stepped in to buy dollars for yen in midday Tokyo trading after the U.S. currency had slid to a seven-month low.

"The recent sharp appreciation of the yen in the exchange market could have undesirable implications for the recovery of Japan's economy. In this context we have taken appropriate action today in the exchange market," Shiokawa said in a statement.

The dollar, which has been depressed by fears of U.S. recession and a prolonged U.S. war on terror, jumped to nearly 118 yen on the intervention. It later settled around 117.80.

"Given the state it's in now, the Japanese economy won't hold up if the yen went to 115 per dollar or higher," said Takashi Yamanaka, an economist with Sanwa Bank."The authorities merely protected a level which they should have protected."

Patriotic rally?

Asian stocks fell despite swelling speculation of a prompt cut in U.S. interest rates -- perhaps even before Wall Street, which spent the weekend cleaning up and testing computer systems, reopens for business.

"Cash is the only place to be. We are in the realms of the unknown," said Amit Thakar, strategist at SG Securities in Singapore."Risk aversion is going to be extremely high and there are no safe havens."

Gold, the traditional safe haven, did in fact rise smartly in Asia. Spot gold was quoted around $290.75/$291.75 an ounce compared with Friday's afternoon fix in London of $285.75.

Tokyo Commodity Exchange brokers also reported brisk demand for gold futures."Rather than buying physical gold, investors came to buy gold futures on TOCOM in anticipation U.S. military action will be the start of a long-lasting war," a trader said.

Asian dollar bonds, by contrast, were left stranded by thin liquidity with investors barely dipping their toes into the market as they waited to see how Wall Street will react after a four-day closure.

"The market is very unstable, there are very few prices, it's very illiquid," said a senior bond trader with a U.S. investment bank in Hong Kong said.

Asia's mood of fear and uncertainty persisted despite defiant talk from some U.S. officials and market players. National Australia Bank in Sydney noted reports of an informal corporate agreement to prevent a free fall in prices.

Legendary billionaire U.S. investor Warren Buffett said he would not be a seller Monday and would even be looking for buying opportunities if prices fell hard.

"Certainly if you owned a piece of an American business that you felt good about a week ago, it would be crazy, in my view, to be selling it at 9:30 tomorrow morning," Buffett told the CBS program"60 Minutes" on Sunday.

Quelle: http://www.cnnfn.com[/b]

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