Japan Leads Pan-Asia Stock Dive
Asian stock markets fell across the board Monday following the rout seen late last week in New York, led by a 3.1% decline in Japan’s benchmark Nikkei stock average, which hit another 17-year low.
Elsewhere in the region, Singapore fell 1.2%, South Korea 0.8%, Taiwan 0.3% and Hong Kong 0.2%. Key Asian markets have fallen 20% to 30% this year.
“We’re looking at an ugly dynamic where large drops in the stock market undercut consumer sentiment,” said Robert Subbaraman, Asia analyst with Lehman Bros. Japan. “It’s a vicious cycle, as the stock market hurts the economy and the economy hurts the stock market.”
Yumiko Yamanaka is one such consumer feeling the pain these days. The 35-year-old part-time nurse bought $1,800 worth of shares several months ago only to see their value fall sharply.
As her confidence in the future has declined, she’s cut back on buying clothes and books and dining out. And although she’s an avid reader, Yamanaka skips the financial section. “I’ve stopped checking share prices,” she said. “It’s so scary the way it just keeps dropping.”
Across Asia, the mood is equally gloomy. “Right now, all news is interpreted negatively,” said Bill Belchere, Singapore regional economist with Merrill Lynch. “I don’t see any easy way out of this one.”
The Japanese market fell hardest among its counterparts Monday with all sectors, including such companies as Sony Corp. and Kawasaki Steel, losing ground. The Nikkei has declined more than 25% year to date and nearly 75% since its peak in late 1989.
The Nikkei closed Monday at 10,195.69, down 321.10 points. In early trading today, it rose 0.74% to 10,271.40.
The U.S. performance was a factor in Monday’s decline, but analysts said it was made worse by further evidence of Japanese government confusion and its seeming inability to grapple with the nation’s many serious economic problems.
Different ministers, the prime minister and economic bureaucrats contradict each other publicly, adding to the perception that there’s no one in charge who understands the scope of Japan’s problem.
“The market feels betrayed,” said Hitoshi Ichio, a strategist with Commerz Securities. “It’s losing patience. The government needs to come out with concrete plans and some sort of unified vision.”
Prime Minister Junichiro Koizumi said Monday that Japan’s market losses are in line with the global trend. But Tsuyoshi Shiba, economist with Sumitomo Marine Asset Management, said that at least half of the Nikkei’s tumble can be blamed on indigenous problems. “It’s really hard to say how low prices could go,” he said. “It’s difficult to stop this downward cycle.”
In Singapore, meanwhile, the Straits Times index hit a 29-month low Monday. In Hong Kong, the Hang Seng index is down 31% on the year. The declines are expected to have an indirect effect on other parts of the economy.
“People are feeling fairly insecure,” said Peter Vamverschaft, Hong Kong-based economist with Barclay’s Capital. “This isn’t going to be good for housing or property prices. People don’t feel good when equity prices go down.”
Over the last few months, consumer spending has held up relatively well in a number of Asian regions, including Hong Kong and South Korea, despite the darkening economic clouds. In the last few weeks, however, retail sales have started to fall everywhere.
This has contributed to growing concern among economists that the regional downturn will be deeper--and more difficult to recover from--than earlier hoped. Asia remains highly dependent on exports, particularly semiconductors and other high-tech products, and shares of firms such as Taiwan’s Acer, Japan’s Hitachi Ltd. and some of the Chinese mobile telecom companies have declined sharply.
Initially, it looked as if the damage could be contained amid predictions that the U.S. economy would bounce back relatively quickly and exports would rebound in tandem as soon as Americans caught their breath.
With the U.S. slump now likely to last until at least the early part of next year, however, analysts fear the export weakness is feeding back into domestic economies. Asian exporters are hunkering down, slashing payrolls and cutting capital spending, which in turn eats into the retail, construction, property and entertainment sectors, which previously had held up relatively well.
“My company’s outlook and the whole information technology industry is declining,” said Yasuhisa Kaneda, a 34-year-old salesman at a Japanese semiconductor company. “My customers can’t imagine making any investment now.”
For Merrill Lynch’s Belchere, the overriding lesson from all this is that Asia has relied on exports far too long and failed to develop more balanced and dynamic economies that could better weather global cycles.
“Asia’s development strategy has had a lot of problems, particularly in old areas of the economy that rely on political connections and insider deals,” he said. “It needs a purge.”
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Hisako Ueno in The Times’ Tokyo Bureau contributed to this report.
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Foreign Market Winners in 2001
It hasn’t been impossible to make money in stocks this year, but the relative few markets that have posted gains have mostly been very small bourses where foreigners tend not to tread. A sampling of markets that have gained ground year to date:
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Market/index Monday close YTD pctg. change Zimbabwe/industrial 49,552.90 +175.5% China/Shanghai B shares 167.98 +87.6 Russia/ASP General 6,881.30 +53.1 Thailand/SET 331.65 +23.2 Chile/general 5,586.31 +14.7 Slovenia/SBI 2,022.25 +11.9 Venezuela/composite 7,482.89 +9.6 South Korea/composite 550.73 +9.1 New Zealand/All Ordinaries 700.31 +4.2 Malaysia/Kuala Lumpur composite 695.28 +2.3 Australia/All Ordinaries 3,183.50 +0.9
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Note: Changes are measured in native currencies.
Source: Bloomberg News
