Global stocks in a tailspin

Dubai: Global stock markets plunged yesterday as US President George W. Bush's $140 billion (about Dh514 billion) tax plan to revive the world's largest economy disappointed investors.

Markets in Europe, Asia and Latin America posted losses of up to seven per cent. Investors were also uneasy as it would take another day to gauge further reaction in the United States, where markets were closed for the Martin Luther King holiday.

"Investor scepticism over the impact of a temporary tax cut trying to save the US economy from a sharp slowdown prompted heavy selling" in equities, said Derek Hal-penny of the Bank of Tokyo-Mitsubishi in London.



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Tokyo's benchmark index closed down a hefty 3.86 per cent, hitting its lowest point since October 2005. Hong Kong shares closed 5.5 per cent lower following a 5.14-per cent plunge by mainland Chinese stocks. South Korea closed down 3.0 per cent, Singapore shed 6.03 per cent and Sydney lost 2.9 per cent.

Sensex cuts early loss

India's benchmark index plunged 7.4 per cent, its second-biggest percentage loss ever. The 30-company Sensex fell 1,353 points - its biggest point drop - to 17,605.35. At one point it was down nearly 11 per cent before partially recovering.

London's FTSE 100 meanwhile ended down 5.48 per cent, its steepest one-day percentage fall since the 9/11 terror attacks. The Paris, Frankfurt and Madrid exchanges also suffered their biggest single day losses since 2001.

Frankfurt declined 7.16 per cent, the Paris market tumbled 6.83 per cent and Madrid fell 7.54 per cent.

The jitters extended to Latin America, where bourses opened with bad news from Sao Paulo in Brazil, Buenos Aires and Mexico.

On the DFM, market leader Emaar Properties slid almost 7 per cent, leading Dubai's main index to plunge more than 5 per cent, as foreign investors sold off in line with the international collapse.

"There are no fundamentals to justify the drop in the market. Profit-taking by foreign investors pushed stocks below certain support levels. Today, we have seen some panic selling among small investors," said Mohammad Yasin, managing director at Shuaa Securities.

"Foreign institutions are selling off to compensate for losses in other markets in the US, Asia and Europe," said Alaa Al Din Moustafa, chief dealer at EFG-Hermes.

Plea for more measures

The foreign exchange market, however, reacted calmly and some dealers described the share sell-off as another short-lived, knee-jerk reaction which offered a buying opportunity. "If (US) interest rates are cut to the extent we expect, the likelihood is that today's share prices will look like silly values," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities.

"It looks like the US is heading for a recession or may be already in recession, looking at the data," said Najeeb Jarhom, head of research for retail clients at Fraser Securities in Singapore.

"The fall in US stocks reflects investor demands for more measures rather than the health of the economy," said Mitsushige Akino, chief fund manager at Ichiyoshi Management in Tokyo.