HONG KONG (MarketWatch) -- Japanese stocks got thrashed Thursday, sending the Nikkei 225 Average down by more than 11% for its worst single-day performance in more than two decades, because of fears about a U.S. recession and a global economic slowdown.
In a session during which a 10% drop in stocks was commonplace in Tokyo as well as across the region, the Nikkei slumped 1,089.02 points, or 11.4%, to 8,458.45, although it ended above a 51/2-year closing low it set last week.
The decline was its worst percentage loss since Oct. 20, 1987, when it tumbled 3,836.48 points, or 14.9%, to 21,910.08. The broader Topix index finished 9.5% down at 864.52.
In Seoul, the Kospi index plummeted 9.4% to 1,213.78, as financial shares suffered steep losses a day after Standard & Poor's placed seven financial institutions on CreditWatch for downgrades. The Korean won also plummeted against the U.S. dollar on worries about the country's weakening economic outlook.
"Certainly, the outlook is for a global recession, but you could argue that the markets' pricing last week already reflected that," said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. "There is no reason why the world economy has to melt down. There are still some stabilizing influences, including the lowering of oil prices."
In Mumbai, the Sensitive Index, or Sensex, pared losses in the afternoon after official data showed the country's wholesale price index-based inflation eased more-than-expected to 11.44% in the week to Oct. 4, from 11.8% in the previous week. The drop in the inflation rate raised hopes of further monetary policy easing by the central bank. The Sensex was recently down 0.3% at 10,780.03, after tumbling as low as 10,017.80 earlier in the day.
nterest-rate sensitive shares rose sharply, with real estate major DLF jumping 6%, while among banks, ICICI Bank advanced 3.1% and State Bank of India climbed 3.3%.
Australia's S&P/ASX 200 index lost 6.7% to 4,013.40, with shares of resources giant Rio Tinto tumbling nearly 16% in Sydney on concern that global demand for commodities was weakening. Declining crude-oil prices added to the selling pressure on BHP Billiton, dragging down its shares more than 13%.
Elsewhere, New Zealand's NZX 50 index gave up 4.8% to 2,764.69 and Indonesia's JSX Composite lost 4.6% to 1,450.46, while Singapore's Straits Times index lost 5.7% to 1,941.37 by late afternoon.
Cohen added that it "wouldn't be surprising" if governments in Asia decided to increase spending or introduce other stimulus measures such as tax cuts to support their slowing economies.
"I think the Asian economies are less vulnerable to financial instabilities now than they were 10 years ago," said Cohen. With a few countries in the region running current-account surpluses and accumulating international reserves, "Asia has a little more flexibility and they don't have to fear that their financial position will crumble," he added.
Hong Kong, China, Taiwan
In Hong Kong, the Hang Seng Index ended down 4.8% at 15,230.52, while the Hang Seng China Enterprises Index lost 6.7% to 7,363.39.
On mainland China, the Shanghai Composite declined 4.3% to 1,909.94, while the Shenzhen All Share index gave up 4.7% to 500.30.
Taiwan's Taiex shed 3.3% to 5,075.97.
"The markets have come back to square one" after the recovery earlier this week, said Ben Kwong, chief operating officer at KGI Asia. "There is continued liquidation by funds, which has pushed down the market even further. Investor sentiment is quite shaky and they're more responsive to negative news."
Resource stocks hammered
Shares of Rio Tinto tumbled 15.9% in Sydney a day after the resources giant said the global financial crisis will force it to delay a planned sale of $10 billion of assets. The company added that China wasn't immune to the global downturn and it may freeze capital spending as it reassesses demand for commodities with a global slowdown looming
