$US2.3 trillion loss in six days on US market

Panic selling in the United States sharemarkets overnight sparked massive Asia-Pacific losses yesterday as cash-hoarding investors propelled the credit drought to crushing dimensions.

Asia-Pacific markets yesterday reflected the earlier stunning hits on the US 5%-7% losses, opening and immediately free-falling during morning trading an astonishing 7%-11% down on some indexes.

New Zealand shed more than $1 billion in value yesterday on the back of its 4.7% plunge by 5pm yesterday while Japan's Nikkei was still trading and faced its biggest daily loss since the 1987 crash, retracing from an initial morning-trade 11% nose-dive.

In one day's trading the Dow Jones Industrial Average index plunged a further 7%, with the accumulated losses during the past 12 days tipping beyond 22%, or more than $US2.3 trillion - with no indication of an end to the share slaughter.

A year after hitting a record 14,000 points the Dow Jones' 7% plunge - its seventh consecutive battering - left the index wallowing well below 9000 points at the end of Thursday trading.

Similarly, the New Zealand sharemarket NZX-SE50 has traded down for six consecutive days, slipping below the benchmark 3000 on Wednesday for the first time in more than three years, but its percentage falls have been less dramatic than US and European losses.

The five main Asian bourses were down on average almost 8% after morning trading while the both the Australian All Ords and S&P 200 index were heading towards the close; both 7.7% down.

AFP reported a "vicious late day sell-off" in New York trading, describing a market gripped by panic which accelerated with traders still uneasy about the global efforts to battle the credit crunch which has led to the financial firestorm.

The International Monetary Fund has estimated losses from the catalyst US sub-prime mortgage fiasco total $US1.4 trillion , however, the subsequent losses to securities world-wide are estimated at $US60 trillion.

Cash hoarding by investors, businesses, financial institutions and banks has undercut massive efforts by governments and central banks to stabilise sharemarkets.

They have pumped or pledged billions of dollars into the market place during the past fortnight to improve credit in the global finance sector, but with little calming effect.

While southern investor confidence has been badly shaken, with clients hitting the phones of leading brokerages ABN Amro Craigs and Forsyth Barr this week, most appear to be sitting tight rather than joining the panic-selling spree.

ABN Amro Craigs broker Peter McIntyre described the US investor panic as "capitulation selling".

"Once this irrational behaviour kicks in and really gets under way it becomes very difficult to rein in", he said yesterday.

Forsyth Barr investment adviser Ken Lister described yesterday's Asia-Pacific opening losses as "awful", prompting throughout the week large numbers of phone calls and emails from clients.

In spite of the panic-selling overseas, Mr Lister said he had booked only one share sale during the week, but there had been a number of buys by new clients beginning a portfolio.

The New Zealand economy's financial service sector was not as proportionally large as the sectors in the US and UK, but negative sentiment from overseas was still a driver in the NZ market.

In the course of a less than 10-minute interview yesterday, three clients telephoned for Mr McIntyre and two turned up unannounced.

Most clients were seeking reassurance but some had an eye to opportunities in the slumping market.

He said clients fell into two camps; either seeking reassurance about portfolios and NZ banks, and secondly, looking for investment opportunities in sound companies.

Investors "flight to quality" had included more inquiries about Government bonds, which had pushed the price up and the yields down, Mr McIntyre said.

NZ banks had little exposure to sub-prime debts, maintained S&P AA ratings and remained well funded, although relied on getting 30%-40% of funds from overseas, Mr McIntyre said.

Paper losses for the year add up to $8.3 trillion, according to figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5000 US-based companies representing almost all stocks traded in America, The New Zealand Herald newspaper reported.

 

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