Asian stocks fall sharply on Wall Street decline after US Federal Reserve rate cut

TOKYO - Asian stocks fell sharply Wednesday morning after Wall Street took a nosedive due to disappointment over the U.S. Federal Reserve's smaller-than-expected cut in its key rate.

Japan's benchmark Nikkei 225 index fell 294.85 points, or 1.84 per cent, to end morning trading at 15,749.87 points on the Tokyo Stock Exchange. The index rose 0.76 per cent the day before.

Hong Kong's blue chip Hang Seng Index lost almost 3 per cent in early trading before rising off the low. By late morning, the index was at 28,401.32, down 2.8 per cent from the previous close.

Analysts said they expected the index to steady out as investors snapped up bargains later in the session.

"We see any pullback in the local market today, following the overnight U.S. market plunge, as a good buying opportunity, as the asset inflation story in Hong Kong remains solid," said Ernie Hon, a strategist at ICEA.

In South Korea, the Korea Composite Stock Price Index, or Kospi, fell 1.52 per cent to 1,895.87 by early afternoon.

In the U.S., the Fed trimmed the federal funds rate by one-quarter percentage point to 4.25 per cent Tuesday. The reduction, the third this year, was aimed at energizing U.S. economic growth, according to Fed officials.

The rate cut disappointed Wall Street investors who hoped the central bank would move more aggressively to help the economy overcome the credit and mortgage crisis. The Dow Jones industrial average plunged 294.26 points, or 2.14 per cent, to 13,432.77.

The Hong Kong Monetary Authority also cut its base rate by a quarter percentage point to 5.75 per cent Wednesday, matching the U.S. rate cut.

Property stocks were the biggest decliners in Hong Kong on heavy profit-taking. Cheung Kong, Henderson Land, SHK Properties, Sino Land and Swire all fell at least 3 per cent.

Japanese stocks fell broadly, from brokerages to shipping lines and metal issues, traders said.

The broader Topix index of all first section issues lost 26.42 points, or 1.69 per cent, to 1,540.60 points.

In currency trading, the dollar was trading at 110.92 yen late Wednesday morning, up from 110.82 yen late Tuesday in New York.

© The Canadian Press, 2007