Tokyo - Stocks across the Asia-Pacific took dives Monday along with the US dollar as investors worried that the credit crisis is worsening after JP Morgan Chase and Co agreed to buy Bear Stearns Cos and the US Federal Reserve cut its lending rate to banks. The biggest losses were seen in India and Hong Kong, but Tokyo was close behind as an upsurge in the yen added to the downward pressure, sending the Nikkei 225 Stock Average below 12,000 and to its lowest level since August 2005.
The benchmark Nikkei closed at 11,787.51, down 3.71 per cent, while the broader Topix index of all first-section issues also tumbled 3.65 per cent to 1,149.65.
The yen rose to its highest level against the dollar since August 1995, weakening the value of exporters' goods in Japan's largest export market. Exporters, such as Mazda Motor Co and Sony Corp, led losses as did financial firms.
In Hong Kong, whose own dollar is pegged to the US greenback, making its economy more sensitive to US economic developments, the Hang Seng closed down 5.18 per cent at 21,084.61.
The index traded 10,000 points lower than its peak of almost 32,000 of late October, prompting the chief executive of the Hong Kong Monetary Authority, Joseph Yam, to appeal for calm.
He said he did not believe the US downturn would have a long-term effect on the Hong Kong market but predicted a period of volatile trading and appealed to investors to reign in their appetite for risk.
India saw panic selling by funds, causing the Sensex and Nifty stock indexes to extend losses, with the 30-stock benchmark Sensex on the Bombay Stock Exchange ending trading at 14,809, down 951 points, or 6.03 per cent.
The broader 50-stock S&P CNX Nifty of the National Stock Exchange closed at 4,484, down 261 points, or 5.5 per cent.
During intra-day trading the Sensex dipped below the 15,000-mark for the first time since August 2007.
"Fundamentals do not justify the declines in the market. There is lack of buying interest among domestic and international investors. They are sitting on the sidelines," Avinash Mehta, a leading stock broker, told Deutsche Presse-Agentur dpa.
Financial issues, such as Australia's Babcock and Brown Ltd and Japan's Mitsubishi UFJ Financial Group Inc, were the hardest hit around the region, where Australia's ASX 200 Index was down 2.3 per cent to 5,087, South Korea's Kospi index fell 1.61 per cent to 1,574.44 and Singapore's Straits Times Index took a 1.63-per-cent drop to 2,792.45.
In Beijing, central bank chief Zhou Xiaochuan said there was room for an interest-rate hike, which sent mainland issues plummeting - the Shanghai Composite Index to its lowest level in eight months.
In mainland China, the CSI 300 Index, which tracks yuan-denominated A shares listed on the mainland's two exchanges, fell 4.63 per cent to 3,965.28 while the Shanghai Composite Index was down 3.6 per cent to 3,820.05 and the Shenzhen Composite Index drooped 6.34 per cent to 1,158.89.
Taiwan's Taiex was also battling concerns about the Chinese economy along with uncertainty over Saturday's presidential election on the island. It plunged 1.91 per cent to 8,005.46.
Traders around the region said investors were worried that Bear Stearns' near-collapse highlighted the fact that the worst of the credit crisis in the United States was not yet over.
The continuing travails prompted Australian Prime Minister Kevin Rudd to warn investors of the credit crunch raising the cost of borrowing.
"Turbulence in global financial markets is putting upward pressure on interest rates through rising credit spreads at a time when Australian interest rates are already rising as a consequence of domestic inflationary conditions in our domestic economy," Rudd said.
The tumbles came after the US Federal Reserve, meeting Sunday in an emergency meeting, cut its lending rate to banks by a quarter of a percentage point to 3.25 per cent in a bid to help inject cash into financial institutions and bolster an economy hit hard by defaults on home mortgages and a tightening credit market.
It also announced the creation of a lending facility to make short-term loans to financial institutions.
The board's action came ahead of its next regularly scheduled meeting on Tuesday, at which analysts expect a cut in its benchmark interest rate of up to 1 percentage point.
The rate cuts, however, have sent the dollar plummeting as investors invest with other currencies as they seek higher returns.
In another development, the US bank JP Morgan Chase is to buy investment firm Bear Stearns for 2 dollars per share after bailing out the company days earlier, the companies said Sunday.
The 240-million-dollar deal comes after a shortage of cash forced Bear Stearns to seek short-term financing from the Federal Reserve through JP Morgan Chase on Friday after clients pulled 17 billion dollars from Bear Stearns over two days, the Bloomberg financial news reported.
The company has been a major holder of bonds backed by risky sub- prime mortgage loans to borrowers with poor credit and the collapse of two of its funds helped spark the collapse of the sector and the economic downturn.
The emergency move sent Bear Stearns shares to their lowest ever on Friday and sparked fears it could go out of business. It lost 47 per cent of its value, or 27 dollars to close at 30 dollars per share - still well above JP Morgan Chase's purchase price.
The deal announced Sunday would be backed by up to 30 billion dollars in financing from the Federal Reserve, which said it had approved the merger.
In other trading around the Asia-Pacific, the Ho Chi Minh Stock Index was down 4.36 per cent, the Philippine Stock Exchange's 30-share composite index dove 3.88 per cent, the Jakarta Composite Index fell 2.98 per cent, New Zealand's NZX-50 index fell 2.1 per cent, the Kuala Lumpur Composite Index dropped 1.45 per cent and the Stock Exchange of Thailand Index dipped 1.34 per cent.
The steep drop in Vietnam was because of a tightening of credit after commercial banks carried out a government-ordered purchase of more than 1.4 billion dollars in government bonds to fight inflation, which hit 15.7 per cent in February.
