The collapse of a congressional deal to bail out automakers in the United States sent stock markets plunging in Asia. Investors around the region fear that more economic trouble in the U.S. will cut demand for Asian exports.
The selloff in Asian stock markets began Friday morning even before the final Senate vote on the rescue plan for American carmakers.
The failure of the rescue plan may force at least some of the Big Three U.S. carmakers to file for bankruptcy.
The losses in some markets were particularly sharp: Tokyo's Nikkei index closed down 5.5 percent, and Seoul's Kospi index gave up about 4.4 percent. The news in Washington was seen as bad news for makers of cars and car parts in Japan and South Korea.
Even Hong Kong's market was rattled, even though the city has no real auto industry. Howard Gorges, vice chairman of South China Financial Holdings in Hong Kong, says that is because the collapse of the automakers bailout might mean higher U.S. unemployment, which means weaker sales for Hong Kong businesses.
"We're very much influenced by Wall Street and indeed what goes on in America. So people here didn't like what they saw," he said. "They're reading into it more problems with the whole auto industry, the suppliers and so forth."
The Hang Seng Index sank 5.5 percent Friday.
The news hit the dollar hard, and it sank to a 13-year low against the yen. At one point the dollar traded just under 89 yen.
That hurts Japanese exporters, because a strong yen makes their goods more expensive in the U.S. Japanese financial officials warned that they think the yen is rising too rapidly, which analysts say may signal a government plan to intervene in the market if the dollar continues to fall.
Gorges says investors in Asia are fearful in part because they do not know how U.S. Chapter 11 bankruptcy law works. It is possible, he says, that developments over the next few days will persuade investors that the news is not entirely bad.
"There have been very good arguments put forward for Chapter 11 and reorganizing industry," he said. "It's not a case of getting rid of the industry. And at the moment people are perhaps not distinguishing it enough."
Governments in the region, however, are taking few chances. The South Korean government announced a deal with China and Japan for what are called currency swaps. This gives the governments the ability to borrow dollars to ease tight credit conditions.
And officials in Beijing announced plans for loans, subsidies and tax cuts to help key industries, such as steelmakers, survive.