RISING fears of imminent war against Iraq sparked selling in global stock markets yesterday, with many indices touching fresh lows.
In Asia, Japan was the worst hit. Its benchmark Nikkei 225 Index plunged 225 points or 2.7% to a 20-year low of 8,144. The Japanese market was also dampened by reports of a probe into alleged stock manipulation by Nikko Salomon Smith Barney.
Singapore's Straits Times Index lost 17.8 points or 1.42% to an 18-month low of 1,226, while South Korea's Kospi Index slid 9.3 points or 1.7% to a 16-month low of 546, and the Taipei Weighted Composite Index lost 47 points or 1% to close at 4,350.
Down under, Australia's All Ordinary Index fell 32 points or 1.2% to a 31/2-year low of 2,715.
European markets also opened lower yesterday. At press time, London's FTSE was 35 points or 1% down at 3,520, the Paris CAC-40 had lost 40 points or 1.6% to 2,592, while Frankfurt's Xetra DAX Index was at a 61/2-year low of 2,420, down 17.4 points or 0.7% from Thursday's close.
On the local front, the KLSE Composite Index fell 6.8 points or 1% to close at an eight-week low of 636.
News that chip giant Intel Corp had trimmed its first-quarter sales forecast accelerated selling of global technology stocks.
The growing expectation of a US-led military action against Iraq also piled heavy pressure on the American dollar, which tumbled to a four-year low against the euro.
In early London trading yesterday, the euro was quoted at US$1.1029 compared with US$1.0967 on Thursday, while the yen strengthened to 116.90 against the greenback compared with 117.37 the day before.
If the US were to start a war without a United Nations resolution, it would most certainly be damaging for the dollar,'' a chief analyst at Bank of Tokyo Mitsubishi was quoted as saying in a news agency report.
Crude oil prices, meanwhile, headed higher, but not sharply ahead of UN chief weapons inspector Hans Blix's progress report on Iraq's disarmament.
The Organisation of Petroleum Exporting Countries' basket of crude rose to US$32.50 per barrel from US$32.29 on Thursday, while Malaysia's benchmark Tapis crude gained 10 US cent to US$34.15 in London. Brent crude, however, was lower at US$34.41 per barrel compared with US$34.53 the day before.
Analysts said the concern now was centred on the duration and outcome of the war as it was a foregone conclusion that a US-led military action against Iraq was inevitable.
For those optimistic of a relief stock market rally, this would be an opportunity to buy on weakness as the war drums beat louder, said a strategist with a Singapore-based stockbroking house.
He said buying decisions now were very much dependent on an investor's risk appetite and investment horizon.
According to the strategist, the consensus view is that the war is likely to be won relatively quickly with varying degrees of casualties on the US side without a devastating strike against an American ally in the region and without a major anti-US backlash.
The war factor has pretty much been factored in by the market in the past months. Hence, the downside risk of Asian markets is relatively low, said a stockbroking firm's research manager.
Besides, Asian economies appear to be more resilient than those in other parts of the world because intra-Asia trade and domestic consumption are likely to cushion any adverse impact from the Iraqi situation, he added.