Asian markets were sharply lower at the end of trading Monday, with most of the benchmark indexes over 3 percent down at the close. Financial stocks sank as rising U.S. inflation lessened expectations for rate cuts in the world's biggest economy.
Surging U.S. inflation figures released Friday and high oil prices fanned concerns the Federal Reserve may be unable to make deeper rate cuts to prevent a possible recession.
Since August, global financial markets have been rocked by a U.S. subprime mortgage crisis, which has dried up credit. Central banks around the world have been cutting rates and intervening in money markets to ease some of the worst strains in the financial system. But investors are still extremely nervous.
Financial stocks on the decline include Australia's Macquarie Group, Japan's Mitsubishi UFJ Financial Group, South Korea's Kookmin Bank and Singapore's DBS Group.
Australia's S&P/ASX 200 Index dropped 3.5 percent to a three-month closing low as property trusts slumped on refinancing troubles atCentro Properties Group and financial sector stocks were dumped on a cloudy outlook for global credit markets. Centro lost a whopping 76.1 percent. It was the most active stock with about 14 percent of its shares changing hands. Centro is the second major Australian victim of the subprime crisis after non-bank lender RAMS Home Loans Group failed to refinance its loans in August. But nickel miner Allegiance Mining surged 38 percent after after zinc producer Zinifex launched an all cash bid worth up to A$775 million (US$668 million).
The Nikkei 225 Average finished down for the fourth straight session, tracking falls on Wall Street. Bank shares were among the hardest hit, with Mizuho Financial Group falling 5 percent on lingering credit concerns. Volatility was high as volume thinned, with many foreign investors winding down trades in the leadup to vacations.
South Korea's KOSPI shed 2.9 percent to a three-week closing low, as worries that surging U.S. inflation would prevent further interest rate cuts in South Korea's No. 2 export market hurt exporters such as Hyundai Motor.
Singapore's Straits Times Index plunged 3.3 percent. Shares of Singapore Telecommunications, Southeast Asia's largest telecom firm, closed 4.6 percent lower as the stock went ex-dividend on Monday.
Hong Kong stocks fell 3.5 percent, pacing a drop on Wall Street, with the city's property developers leading the losses. Shares in newcomer Uni-President China Holdings, the mainland China arm of Taiwan's largest food and beverage conglomerate, managed to close the morning 1 percent higher than their HK$4.22 IPO price after struggling in earlier trade.
Chinese shares dropped 2.6 percent with property developers leading the decliners as
PBOC Vice Governor Liu Shiyu's remarks intensify fears of upcoming tightening measures targeted at the sector. Liu said rapid lending growth may cause a property-market bubble.