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Most Asian Markets Follow US Downward Trend - 2002-07-22

Stock markets in Asia ended down Monday following a steep fall on Wall Street Friday. However, Hong Kong share prices held up better than expected.

South Korea's main share index took the biggest hit - with the Kospi closing at 720, almost 4.5 percent below Friday's finish. Government measures to stabilize the market there did little to boost investor sentiment.

Friday, the Dow Jones Industrial Average in the United States sank nearly five percent, to its lowest level since 1998. The sell-off there had market watchers in Asia bracing for a bloodbath in the region's markets. Some investors fear the stock slump could halt the United States' economic recovery, and that would hurt Asia's export-driven economies.

Other than South Korea, however, Asia's losses were not drastic Monday. Hong Kong's main share index ended 2 percent down to close at 10,110. Taiwan also lost two percent while Singapore sank one and a half percent. Philippines' main index shed only 9 points.

Equity strategist Ajay Kapur of Citigroup Hong Kong says that losses in the U.S. equity market are related to high valuations and accounting scandals. He says those problems have little bearing on Asian equities. "On a valuation perspective we look pretty good, we have a current account surplus, the U.S. has a current account deficit," he said. "Our companies are generating massive positive free cash flow. One can't say that for the U.S. and I'd say our corporate defaults and bad debts are also a lot lower than five years ago."

Tokyo stocks were steady Monday - the Nikkei average slipped just 13 points to close at 10,189 points. Some analysts say investors are starting to see Japanese shares as reasonably priced, so some investors came in to buy.

Chuck Lambert is a market strategist with JP Morgan in Tokyo. "The Japanese yen is going up against the dollar, that makes equities here somewhat more attractive for overseas investors," he said.

Asian investors largely ignored news that telecommunications company WorldCom filed the largest U.S. bankruptcy in history. The move was expected and had only modest effect on the Asian markets, although some analysts expect it to spark more selling in the United States markets later Monday.