FEARS OF IMMINENT GLOBAL FINANCIAL CRISIS

Asian markets “blood bath”

09-17-2008 | AP

The Asian stock market plummeted after the news of the Lehman Brothers collapse and the Merrill Lynch takeover

Panama Star European markets extended losses in early trading after falling sharply Monday.

Tokyo's Nikkei 225 index sank nearly 5 percent to 11,609.72, its lowest close since July 2005, while Hong Kong's blue-chip Hang Seng Index shed 5.4 percent to its lowest point in nearly two years. Both markets — Asia's two biggest — had been closed for holidays on Monday, when news first broke about the turmoil on Wall Street that has dramatically changed its landscape.

"Today was a bloodbath," said Alex Tang, head of research at Core Pacific-Yamaichi, who noted that trading volume was its highest in months. "This was panic selling... They are dumping shares, they just want to liquidate their positions."

South Korea's main index slumped 6.1 percent, Taiwan's benchmark was off 4.9 percent, and China's Shanghai index dropped 4.5 percent to a nearly two-year low. To ensure liquidity, Japan's central bank on Tuesday injected of 2.5 trillion yen (US$24 billion) into money markets and issued a statement vowing to take measures to maintain stability in the country's financial markets.

The dollar also took a hard hit, sinking to 103.83 yen Tuesday afternoon in Asia from mid-107 yen levels before the weekend.

The Japanese unit of Lehman Brothers Holdings Inc. on Tuesday sought bankruptcy protection at a Tokyo court after the 158-year-old firm filed for Chapter 11 bankruptcy in New York the previous day.

The Tokyo Stock Exchange halted securities trading by Lehman Brothers a day after Japan's financial watchdog ordered to suspend operations.