The United States "meltdown Monday" engulfed the Asian sharemarkets yesterday with losses ranging almost to 6% while the Australian and New Zealand bourses were down less than 3%.
After the Dow Jones Industrial Average plummeted 4.42%, the NZX initially plunged almost 2.5% on opening yesterday and later closed down 2.78%, while the ASX All Ords, which opened down at 2%, was still trading down about 2.4% at 5pm yesterday.
Many of the Asian bourses were closed on Monday due to a variety of holidays affecting Japan, South Korea, China and Hong Kong, but investors quickly began off-loading shares when the markets reopened.
ABN Amro Craigs broker Peter McIntyre said investors in the Asian bourses were playing "catch up" to the US, noting Japan and South Korea had been "pummelled by fleeing investors" with market losses between 5% and 6%.
"All attention now will be focused on how the [US] Federal Reserve will act to combat this. The only way forward is to let them [stricken corporations and banks] fall over without [federal] assistance," Mr McIntyre said.
The weekend collapse and bankruptcy filing on Monday of Lehman Brothers investment bank in the US, confirmed as the largest bankruptcy in corporate American history with $US613 billion of debt, sparked the US Federal Reserve to invoke emergency measures to calm markets, as investors hastily sold stock.
However, keeping US investors on tenterhooks now is the future of the country's insurer American International Group, with calls by the US Government for two major banks to step up and provide funds towards a $US70 billion to $US75 billion lending facility to the cash-strapped insurer.
Mr McIntyre said further assistance to corporations or banks by the Federal Reserve would create more uncertainty and market volatility, as opposed to the Fed doing nothing and letting those organisations fall.
"That would bring certainty to the markets and be viewed positively," he said.
The heaviest selling was in the Australian market, with the financial sectors and banks being hardest hit, Mr McIntyre said.
News filtered through yesterday, following the Lehman filing and AIG concerns, that the ANZ in Australia had exposure of about $US120 million to Lehman Brothers and the National Australia Bank, which owns the Bank of New Zealand, has a $US10.3 million exposure to Lehman with a letter of credit.
Later, Westpac disclosed its exposure to the Lehman Group of companies was less than $A10 million.
