World markets plunge on global instability
Agencies, Jakarta
Most equity markets around the world suffered steep losses on Thursday as investors took fright at events on Wall Street, where stocks plunged to their lowest levels for five years.
In New York, stocks opened lower on Thursday as signs of rising unemployment hit the market a day after key indexes sank to 1997 lows amid mounting worry over corporate earnings, accounting scandals and global instability.
Nevertheless, after 40 minutes' trade, the Dow Jones index was up 37.73 points or 0.43 percent at 8,851.23.
Asian equity markets reeled following news federal prosecutors had launched a criminal investigation into No. 4 U.S. local phone company Qwest Communications International Inc.
"When fear takes over, no stocks are immune," Amit Thakar, a strategist at SG Securities in Singapore was quoted by Reuters as saying. "Whether they have a yield or they don't have a yield, they are growth or value, nothing is going to stop for the moment the fear factor."
European bourses were heading to nine-month lows as investors ducked out of equities, snapping up ultra safe government bonds.
The FTSE Eurotop 300 index of pan-European blue chips fell 1.92 percent.
Confidence has been hit hard for several days by increasing evidence of fraudulent or aggressive accounting practices, notably in U.S. companies.
Analysts were skeptical that there would be any near term end to the rout sparked by the alleged US$3.85 billion fraud at U.S. long-distance telecoms carrier WorldCom Inc., and which has gathered pace after investors gave a thumbs-down to U.S. President George W. Bush's proposals to crack down on corporate corruption.
The Qwest announcement was a fresh blow to confidence in the market.
Analysts said that with the slide in global stock prices gathering momentum, as concern mounts over the extent of accounting malpractice in corporate America, there were now real worries that the fragile recovery in the global economy was in danger of stalling.
South Korea led Asia's losses on Thursday, with the Korea Composite Stock Price Index, or Kospi, ending 3.8 percent lower at 764.88. Japan's Nikkei 225 Average lost 2.5 percent to close at 10485.74, while Hong Kong's Hang Seng Index fell 2.1 percent to 10558.81.
The Jakarta Composite Index ended down 1.4 percent, or 6.556 points, at 470.819.
The rupiah closed at a two-month low against the dollar at Rp 9,125 amid heavy foreign selling on the local stock market.
Most other Asian stock markets closed at least 1 percent down. In Asia only China was immune to the rout.
Fund managers and analysts expect stock markets in Asia and the rest of the world to remain under selling pressure unless confidence for U.S. equities is restored.
"I wouldn't consider this a short-term fix. It would take a long time before investors can move on (from this issue)," said Tien Doe, head of research at Morley Fund Management (Singapore) Ltd.
The downward spiral in U.S. stocks is only part of the problem, fund managers say. The greater fear among investors is whether the continued slide in U.S. stocks will hurt U.S. consumer sentiment, which has so far been supporting U.S. economic growth.
Fund managers believe that Asian companies are not as vulnerable to accounting irregularities as their U.S. counterparts, but noted that this would not help ease investors' concerns.
They said there was less temptation to manipulate financial books among Asian companies, where senior management's compensation and bonuses were not usually linked with stock options or earnings performance.