ASIAN stock markets tumbled yesterday in response to a plunge on Wall Street last Friday over fresh United States recession fears.
Bourses from Hong Kong to Australia to Singapore were battered as fund managers sold their holdings to cover US losses.
Likewise, retail investors also headed for the exit in anticipation of a correction.
Last Friday, the Dow Jones Industrial Average plunged 367 points, or 2.6 per cent, as record high oil prices, banking woes and slower corporate earnings revived fears of a US recession.
It was no different when Wall Street opened for trading yesterday. The Dow, which fell by more than 100 points in early trading, slid 12.92 points, or 0.10 per cent, to 13,509.10 at press time.
When Asian markets opened yesterday, they quickly went into a tailspin.
At home, the Straits Times Index (STI) sank by 105.34 points, or 2.81 per cent, to close at 3,642.64.
Japan's Nikkei dropped 2.24 per cent, China's Shanghai Composite dived 2.59 per cent, while South Korea's Kospi slumped 3.36 per cent.
Said CIMB-GK research head Song Seng Wun: 'Regional markets felt the jitters from last Friday, and the selldown level was within expectations.
'But there's still quite a lot of liquidity floating around, and investors may be looking to pick up stocks on the bargain. We could be in for a rollercoaster ride this week - down, then up.'
The selldown was most severe in Hong Kong, which reopened yesterday after a holiday last Friday.
The Hang Seng Index plunged a whopping 1,091.42 points, or 3.7 per cent, to close at 28,373.63 points. That was its biggest single-day drop in points in more than seven years.
Analysts said the Hong Kong market was ripe for a correction after its recent bull run.
Even before Wall Street's nosedive, the writing was on the wall for Hong Kong stocks last week. US investment bank Morgan Stanley warned of a 30 per cent correction in the next three months as stock valuations had become 'untenable'.
Said a local dealer: 'We simply mirrored Hong Kong's dive. Despite the general selldown, we also saw several attempts by investors to buy in throughout the day.'
Spooked by Wall Street's plunge, the STI lost over 100 points in the first hour, before rebounding to the 3,667.66 mark at mid-day. But the selldown resumed post-lunch when European markets opened, sending the index down to its close of 3,642.64 points.
It was a sea of red among local blue chips with only two of the STI's 48 constituent stocks in positive territory.
While market experts warn of bumpy rides till the end of the month, they do not expect a repeat of the 20 per cent dive triggered by the US mortgage crisis in August.
Said AmFraser Securities senior vice-president of research Najeeb Jarhom: 'We're looking at another period of uncertainty, which will be less severe than the August correction.'
alfoo@sph.com.sg
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