US recession fears sink global markets

Tokyo: Asian and European stock markets plunged on Monday following declines on Wall Street last week amid investor pessimism over the US government's stimulus plan to prevent a recession.

India's benchmark stock index tumbled 7.4 per cent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 per cent to 23,818.86, its biggest percentage drop since the September 11, 2001, terror attacks.

Investors dumped shares because they were sceptical that an economic stimulus plan President Bush announced Friday would shore up the economy, which has been battered by housing and credit problems. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

Concerns about the outlook for the US economy, a major export market for Asian companies, has sent the region's markets sliding in 2008. Just last Wednesday, the Hang Seng index sank 5.4 per cent.

Japan's benchmark Nikkei 225 index slid 3.9 percent to 13,325.94 points, its lowest close in more than 2 years. China's Shanghai Composite index plunged 5.1 per cent.

The sell-off continued in Europe. Germany's DAX was down 4.2 per cent in morning trading, France's CAC 40 slid 4.7 per cent, while Britain's FTSE 100 dropped 3.6 per cent.

"People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.

In Tokyo trading, exporters got hit hard, partly because of the yen's recent strength against the dollar. Toyota Motor Corporation lost 3.3 per cent and Honda Motor Co. sank 3.4 per cent.

In Hong Kong, Bank of China dropped 6.39 per cent and China Construction Bank slid 7.83 per cent.

In Mumbai, India, the benchmark Sensex index fell 1,353 points, or 7.4 per cent - its second-biggest percentage drop ever - to 17,605.35. At one point, it was down nearly 11 per cent.

The decline hit companies across the board, with power utility Reliance Energy Ltd. falling 16.4 per cent. Major software company Tata Consultancy Services Ltd. slid 7.6 per cent.

"A gloomy US climate has affected the global markets. Even if those markets recover, it will take sometime for the recovery to reach India because Monday's fall has been so drastic," said Jayant Pai, of the Mumbai investment company IL&FS Ltd.

Still, Pai and others suggested that the declines could lead to a buying opportunity.

"The sell-off today takes us close to the bottom," Pai said.