War fears and Fed take their toll

THE rattling of sabres by President George Bush and the wagging finger of Federal Reserve Board chairman Alan Greenspan sent Asian stock markets into a spin today. Stock prices slumped across the region as traders took their cue from big overnight falls on Wall Street and Nasdaq.

Both markets lost more than 2% after Greenspan called for fiscal discipline to be restored, or the cost would be high interest rates, lower capital spending, reduced production, and some hard choices in the future. His warning of the need for good economic housekeeping was backed up by a record current account deficit of US$112.5bn(£72bn) in the end-June quarter. The weakening fundamentals of the US economy hurt the US dollar, in turn damaging the prospects for Asia's exporters.

Japan's Nikkei 225 Average plunged 173.30 points to 9241.93, led down by stocks of big exporters, who were further depressed by poor jobless figures from the US, which could signal more downward pressure on consumer spending.

Sony Corporation, down almost 3%, led falls in Tokyo, where semiconductor stocks were also being pasted by a flow of downgrades on the sector from US analysts. Fujitsu Corporation, Japan's biggest personal computer manufacturer, outpaced the rest of the market with a 7% dive after it admitted it had shipped 10m potentially flawed hard drives to global customers, although the final tally of faulty drives could be around 300,000.

An expected call for more action by the Bank of Japan to prop up the economy and ailing banks lifted the value of 10-year bonds, taking the yield below 1% for the first time in more than four years. Buyers were counting on the BoJ hoovering up bonds to put more liquidity into the money markets.

President Bush's call to arms delivered to the United Nations raised anxieties about the impact of a Middle East conflict in other Asian markets, many of which are dependent on oil imports for their major energy needs.

Hong Kong's Hang Seng index tumbled 238.89 to 9657.44, as war fears dried up turnover, leaving blue-chips vulnerable to selling pressure. Biggest fallers included telecommunications providers, with PCCW, the major fixed-line carrier, down more than 3%, a fall matched by mainland giant China Unicom.

HSBC Holdings, the top traded stock of the morning, fell HK$1.75 to HK$85.75 on concerns about its US earnings, while export bellwether Li & Fung was the biggest faller in the index, losing more than 4%. Fears over a rising oil price, and slowing demand for technology products left South Korea's Kospi as the biggest casualty of the day, down 21.11, or 2.86%, to 718.11.

Taiwan's Weighted Average fell 61.46 to 4585.91. A rush into defensive gold mining stocks at the expense of blue-chips left Sydney's All Ordinaries down 15.1 at 3075.8. Potentially long-term rises in oil prices failed to boost BHP Billiton and other resources stocks, while the clouds over the US economy sliced 3% from News Corp.

Nasdaq's fall hurt Singapore's Straits Times index, which dropped 12.75 to 1420.68, and Kuala Lumpur's Composite slid 7.84 to 686.27. Thailand's SET retreated 4.79 to 356.70, while the Jakarta Composite was 6.90 lower at 421.29.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables.