Asia Roundup: Lower on new US debt plan

HONG KONG: Asian stock markets slumped yesterday as the US Federal Reserve's latest multi-billion-dollar move to shore up the American economy met with worldwide disappointment.

The US dollar strengthened against regional currencies as investors sought its safe-haven status after the US central bank warned of serious downside risks for the global outlook.

Tokyo fell 2.07 per cent, or 180.90 points, to 8,560.26, Seoul dived 2.90 per cent, or 53.73 points, to 1,800.55, and Sydney plunged 2.63 per cent, or 106.9 points, to 3,964.9, its lowest in over two years while, Shanghai was 1.76 per cent off.

The US Fed said after a two-day policy meeting that it would shift US$400 billion in its shorter-term debt portfolio holdings to longer-term bonds, a move it said would lower rates for mortgage holders and businesses. The plan - nicknamed Operation Twist - would also entice banks to put some of their idle reserves to work.

However, in announcing the new plan, the US Fed warned of "significant downside risks to the economic outlook", with the economy struggling with slow growth, high unemployment and a depressed housing market.

"The US Fed's economic view is sharply deteriorating and there seems to be little it can do as a next step with Republicans calling on the US Federal Reserve not to intervene," Yutaka Miura, a senior technical analyst at Mizuho Securities, told Dow Jones Newswires.

And Mitul Kotecha, a strategist at Credit Agricole, said: "The overwhelming tone is likely to remain negative, especially since Operation Twist is unlikely to change the dynamics of a weak growth trajectory for the US and developed economies over the coming months."

In other markets:

* Taipei dived 3.06 per cent, or 230.38 points, to 7,305.50. HTC shed 5.33 per cent to T$710.0 while Taiwan Semiconductor Manufacturing Co was 4.17 per cent lower at T$69.0.

* Manila tumbled 2.57 per cent, or 108.19 points, to 4,096.10. Lepanto Mining fell 1.5 per cent to 1.29 pesos, Philippine Long Distance Telephone dived 2.3 per cent to 2,238 pesos and Alliance Global shed 3.2 per cent to 9.73 pesos.

* Wellington edged 0.10 per cent, or 3.46 points, higher at 3,312.29. New Zealand Telecom rose 1.5 per cent to NZ$2.64 while Fletcher Building fell 0.1 per cent to NZ$7.45. Fisher & Paykel jumped 3.5 per cent to NZ$3.48.

* Bangkok fell 3.79 per cent, or 39.00 points, to 990.59. - Bernama