Asia markets crumple after U.S. markets tumble

October 13, 2000
Web posted at: 2:26 PM HKT (0626 GMT)

SINGAPORE (Reuters) -- Asian markets crumpled again early on Friday as the double-whammy of Wall Street's earnings panic and rocketing oil prices brought down share indices from Seoul to Singapore.

In Tokyo, the Nikkei average was down 1.77 percent at 15,274.95 at midday, after recovering from an earlier low of 15,101.64, the lowest intraday level since March 9, 1999.

Seoul's Korea Composite Stock Price Index (KOSPI) tumbled 4.62 percent to 510.00 in early trade and the Korea Stock Exchange (KSE) suspended programme trading linked to KOSPI200 futures contracts for five minutes because of sharp losses.

In Tokyo, Finance Minister Kyichi Miyazawa, advising caution ahead the approaching weekend, said things looked like they could be "rough on the horizon."

On Thursday, the Dow Jones industrial average ended down 379.21 points, or 3.64 percent, at 10,034.58, its fifth largest point loss ever and its lowest finish since March 14.

The Nasdaq composite slumped 2.96 percent, or 93.81 points, to 3,074.68, the technology heavy measure's lowest close since early November 1999.

The U.S. markets tumbled following a profit warning from Home Depot Inc, the world's largest home improvement retailer, and news of an assault on U.S. Navy destroyer USS Cole in Yemen and more Israel-Palestinian violence.

The escalating Middle East violence took oil prices to almost decade highs overnight.

Benchmark crude prices in the United States and the Atlantic Basin soared almost $3 a barrel on Thursday after Israel launched military attacks on Palestinian-ruled territories in retaliation for the mob killing of two Israeli soldiers.

Asian crude and oil products markets were subdued early on Friday, resisting any temptation to build on overnight gains stemming from escalating violence in the Middle East.

Spiraling oil prices were the chief concern in Tokyo, where broad-based sales pushed share prices lower.

"The big question is the fate of crude oil prices, and we don't know the answer to that yet," said Takashi Miyazaki, senior strategist at Partners Asset Management.

Analysts said if the Dow started marching down toward 8,000 points and the Nasdaq to 1,000, the Nikkei would fall toward the 12,000-13,000 level.

But should oil prices stabilize at current levels, the Nikkei's downside would be limited to the higher end of the 14,000-15,000 range.

Miyazawa said there were signs that Tokyo's stock market was not really reflecting Nasdaq's movements, adding it was not a situation that warranted concern in Japan.

But some other Asian governments were less sanguine.

Taiwan's Ministry of Finance said on Friday it had eased rules to encourage listed firms to buy back their own shares effective from Monday in a bid to prop up share prices.

The benchmark TAIEX opened 3.91 percent lower and by 0103 GMT, or three minutes after trade began, it was down 5.47 percent at 5,487.68.

"It's pretty bad for the slumping local stock market as Wall Street tumbled and oil prices surged at the same time," said Yungli Securities trading manager Chen Han-chung.

"But really the TAIEX is seriously oversold because of heavy margin-call selling. It should rebound soon," Chen said. "A year later, you would regret having sold shares at current low levels."

The TAIEX eventually recovered to trade 0.86 percent higher at 5,854.97 after the state stabilization fund actively bought shares to support the market. Brokers said the government was expected to announce stimulus measures on Saturday.

Singapore shares were trading over three percent lower at 1,806.69 at 0405 GMT, but had recovered slightly after an earlier break of psychological support at 1,800 points.

"People are looking at a possible war in the Middle East and oil prices are soaring. And what is going to happen on Wall Street tonight? There is just too much uncertainty," said a dealer with a Singapore brokerage.

Asian currencies slid early on Friday as global equity markets shuddered over the prospect of higher oil prices as the clashes in the Middle East took a turn for the worse.

"There has been a lot of domestic news that's been hurting the regionals," said Mansoor Mohi-uddin, a currency strategist at UBS Warburg. "But it's the external factors right now that are moving the currencies."

Domestically, political uncertainty in Thailand, the Philippines and Indonesia added more gloom to the regional picture.

In major currencies, the yen slipped slightly against the dollar, while the euro also came under pressure in early trading.

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