Asian stocks opened sharply lower on Tuesday, as worldwide markets plummeted following big declines on Wall Street last week amid investor pessimism over Bush administration's stimulus plan to prevent a likely recession.
The Japanese Nikkei 225 opened Tuesday down 500 points, or 3.5 per cent, while Seoul composite down nearly 70 points, or 4 percent.
US markets were closed Monday, for Martin Luther King Jr. Day, but the downbeat mood from last week's market drops circled through Asia, Europe and the Americas. Britain's benchmark FTSE-100 slumped 5.5 percent to 5,578.20, France's CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.
In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the September 11, 2001, terror attacks in New York and Washington DC.
Canadian composite index on the Toronto Stock Exchange fell 4.8 percent. Brazilian stocks plunged 6.6 percent on the main index of Sao Paulo's Bovespa exchange, and Argentina's benchmark Merval index fell 6.3 percent.
Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by the US Congress, calls for about $145 billion worth of tax relief to encourage spending.
Concerns about the outlook for the US economy, a major export market for Asian companies, has sent the region's markets sliding in 2008. "It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the US stimulus package is too little, too late and investors feel it won't help the economy recover."
Japan's benchmark Nikkei 225 index slid 3.9 percent to close at 13,325.94 points, its lowest close in more than two years. China's Shanghai Composite index plunged 5.1 percent, partly on worries about Chinese mainland banks' exposure to risky US mortgage investments.
"People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.
Investors took cues from the negative reaction to the president's plan on Wall Street on Friday, when the Dow Jones industrial average slid 0.5 percent to 12,099.30, bringing its total loss since beginning of 2008 to nearly 9 per cent.
Some analysts predict that Asia won't suffer dramatically from a US recession because increased trade and investment within Asia has made the region less reliant on the United States than in the past. Excluding Japan, 43 percent of Asia's exports go to other nations in the region. But on Monday, uncertainty and pessimism reigned.
Shares of Bank of China dropped 6.4 percent in Hong Kong after the South China Morning Post newspaper reported that the bank is expected to announce a "significant write-down" in US subprime mortgage securities, citing unidentified sources. In Shanghai, the bank's stock declined 4.1 percent.
India's benchmark Sensex index fell 1,353 points, or 7.4 percent - its second-biggest percentage drop ever - to 17,605.35 points. At one point, it was down nearly 11 percent.