Hong Kong stocks crumbled under a barrage of selling Monday, with the benchmark Hang Seng Index plunging 12.7% to its lowest finish in more than four years as investors who bought shares on credit were forced to offload them in a falling market.
The benchmark Nikkei 225 Index shed 486.18 points or 6.4% to close at 7,162.90 while Hong Kong's Hang Seng Index fell 1,602.54 points or 12.70% to close at 11,015.84.
Shortly after the markets closed, the Japanese Prime Minister Taro Aso said that the government will expand its bank bailout scheme to ease the strains on banks and strengthen rules on short-selling of stocks.
Earlier in the day, Japan's finance minister Shoichi Nakagawa said that the government was closely watching the foreign exchange market and added that excessive currency moves were bad for the economy and financial markets, indicating that the government was growing concerned about the pace of the yen gains. However, the government offered no large-scale measures to shore up the economy. Meanwhile, the Group of Seven industrialized nations warned that a surging yen posed a threat to the global financial and economic stability.
On the economic front, the Bank of Japan said on Monday that corporate service prices inched up 0.1% on year in September, marking the slowest rise since January 1985. That was well below analyst expectations that called for an annual increase of 1.2%, and it was also sharply lower than the 1.4% increase in August. Advertising prices were the biggest decliner, falling 4.5%, while transportation stocks made the largest jump at 1.6%.
In the currency market, the U.S. dollar fell to the upper 92 yen-level late Monday following the plunge in the Nikkei Index and despite the warning from the G7 industrialized nations. In late trades, the dollar was quoted in a range of 92.95-92.98 yen, down 2.19 yen from Friday's close of 95.14-95.17 yen in Tokyo.
Banking stocks closed sharply lower following reports that they are considering plans to boost their capital. Mitsubishi UFJ is reportedly considering raising up to 1 trillion yen to replenish its capital. Media reports also said that Mizuho Financial and Sumitomo Mitsui were looking to raise capital. Mitsubishi UFJ fell 14.6%, Mizuho Financial shed 14.8% and Sumitomo Mitsui Financial dropped 11.5%.
Among exporters, Sony dropped 7%, Toyota dipped 8.1%, Honda dropped 8.9% and Canon fell 10.9%. After the market closed, Canon reported a 26% drop in its quarterly operating profit and slashed its annual outlook.
Elsewhere:
China's Shanghai Composite Index slid 116.27 points or 6.32% to finish at 1723.35.
Taiwan's weighted index dropped 212.75 points or 4.65% to close at 4366.87.
Indonesia's Jakarta Composite Index closed down 78.46 points or 6.30% at 1,166.41.
Australia's S&P/ASX 200 index fell 1.6% to 3,809.20, with financials as well as resource stocks trading lower on worries about the global economy.
Stock markets in Singapore, New Zealand and Malaysia were closed for a holiday.
with files from other wire services
