Asia Markets Sink on US Economy Fears
Friday January 18, 2:25 am ET
By Yuri Kageyama, AP Business Writer

Asian Markets Plunge on Fears About Possible US Recession; Nikkei Sheds 2.8 Percent

TOKYO (AP) -- Asian markets plunged Friday amid growing fears that the American economy could be headed for a recession after weak U.S. manufacturing figures and an overnight drop on Wall Street.

In Tokyo, the region's largest market, the benchmark Nikkei 225 stock index lost 387.67 points, or 2.8 percent, to end morning trading at 13,395.78.

Hong Kong's blue chip Hang Seng index plummeted 3.7 percent at the opening, but then trimmed losses as investors snapped up shares that have fallen sharply since the start of the year. By midday, it was down 400 points, or 1.6 percent, at 24,714.

The region's markets have been shaken this week, including a steep decline Wednesday. Investors are worried after Thursday's drop on Wall Street, and that a contraction in the U.S. economy, a key export market, will hurt corporate profits, said Yasunari Ueno, analyst at Mizuho Securities Co. "That sums up the global reaction for now," he said.

The key index in the Philippines sank 2.5 percent, while Singapore's market was down 1.6 percent. The declines came a U.S. government report showed a sharp and unexpected decline in manufacturing activity and figures that showed housing starts plunged to their weakest pace in more than 16 years.

That helped send the Dow Jones industrial average sliding 2.5 percent Thursday to 12,159.21, its lowest level since last March. Investors around the world are anxious about the full extent of the subprime mortgage crisis in the U.S., which has led to a credit crunch and billions of dollars of losses at major American investment banks Citigroup and Merrill Lynch & Co. due to write-downs of bad assets.

Recent signs of slower U.S. consumption has added to concerns that the American economy might contract, weakening demand for Asian electronics, autos, clothing and other exports. A recent surge in the yen has also made investors worried about exporters' earning power.

The dollar was trading at 106.71 yen late morning, down from 107.00 yen late Thursday in New York. Japanese Economy Minister Hiroko Ota, who has in the past sometimes played down the worries about growth, acknowledged Friday the risk of a U.S. economic slowdown was real. "U.S. economic indicators have been sluggish," she told reporters. "We will carefully watch how this will impact the Japanese economy."

The Hong Kong market has been volatile, losing 5.4 percent Wednesday, its biggest single-day percentage drop since the Sept. 11, 2001, attacks, but rebounding Thursday 2.7 percent. But some analysts say the Hong Kong bourse is oversold and expect it to rebound on bargain-hunting in stocks less exposed to the U.S. economy, such as property or China-related issues.

In Tokyo too, traders said some investors may start bargain-hunting buying, as some companies, including Toyota Motor Corp., which has been seeing booming sales, may be undervalued. Shoji Yoshigoe, general manager at Mitsubishi UFJ Securities, said investors were cautious because of speculation about a surprise U.S. interest rate cut. "There may be buybacks later this afternoon," said Shoji Yoshigoe, general manager at Mitsubishi UFJ Securities.