Stocks in Asia-Pacific region fell sharply Wednesday, with Tokyo and Hong Kong losing around 9 percent, an indication of somewhat shattered confidence towards worsening global financial crisis.

Japan's benchmark Nikkei 225 index shed 9.4 percent to 9,203.32, hitting a five-year low. It was the third-biggest drop in the history of Asia's largest bourse and the largest single-day dive in more than two decades.

As Tokyo stocks continued to fall, the Bank of Japan pumped 2.1 trillion yen (about 20.57 billion U.S. dollars) into the money market, its 16th straight day of intervention, but the move yielded little effect.

"Honestly, this for us is beyond our imagination. We have huge fears going ahead," Japanese Prime Minister Taro Aso told a parliament committee.

Hong Kong's benchmark Hang Seng Index dropped 8.17 percent to 15,431.73, its lowest level in 28 months. Turnover was 77.78 billion Hong Kong dollars (about 9.97 billion U.S. dollars).

The plunge came despite Hong Kong Monetary Authority's surprise rate cut of 100 basis points before the opening of the market.

Other major stock markets in the Asia-Pacific region also underwent significant drop. Taiwan share prices plunged by 5.76 percent and Australia market tumbled by 4.9 percent. In Indonesia, its main index had fallen 10.4 percent to 1,451.67 points before the trading was suspended for the day.

Stock markets across the globe have been plummeting in recent weeks following the collapse of U.S. investment bank Lehman Brothers and the government bailout of insurance giant AIG.

U.S. lawmakers passed a 700-billion-dollar rescue package for the U.S. financial system last week, but it still failed to boost the sentiments of investors worldwide.

Shattered confidence

Fears of deepening world economic slowdown have greatly discouraged investors' confidence, analysts said, as Wednesday's markets were predominated by massive selling with seldom a buyer in sight.

"The core of the issue is not economic, it's about confidence," commentator Shi Qiping said in a Phoenix TV interview.

"It is a very rare and truly peculiar situation now," he said, adding that the huge cash injected by central banks had been " absorbed" and seemed to have gone nowhere.

The waning confidence was not ungrounded. The International Monetary Fund (IMF) warned on Wednesday that the U.S., at the center of an intensifying global financial storm, could face an economic recession.

It projected that the U.S. economy would decline in the final quarter of this year and the first quarter of 2009, stabilize in the second quarter, and then embark on a gradual recovery.

The economy will only return to potential growth in 2010, the IMF said, adding that "risks around this forecast are to the downside."

In part of an act to reassure the jittery investors, ministers from the 10-country Association of Southeast Asian Nations (ASEAN) said they are confident that regional banks and the financial system would be able to weather the global credit crunch.

In a statement released after a meeting in Dubai, the ministers said regional economic fundamentals "remain sound" in spite of the liquidity crisis, adding that there is little chance of a repeat of the 1997 financial crisis that crippled Southeast Asian economies.

"ASEAN today is lean and fit, in part reflective of the significant reforms undertaken over the decade since the 1997 financial crisis," the statement said. "ASEAN member states have strengthened fiscal sustainability, deepened capital markets, enhanced financial regulation and supervisory frameworks, reduced debt exposure and improved their reserve positions."

The magic bullet?

After the closing of most of the stock markets in Asia-Pacific region on Wednesday, major central banks in the world launched a concerted effort to battle the global financial crisis, simultaneously slashing interest rates on three continents to bolster battered markets.

The U.S. Federal Reserve, European Central Bank, Bank of England, and central banks in Canada, Sweden and Switzerland all cut interest rates by a half percentage point.

"Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets," the banks said in a joint statement.

Australia had previously sliced its interest rates before the coordinated cut.

China's central bank on late Wednesday also announced its responding move, cutting both the interest rate and reserve- requirement ratio.

The deposit and lending rates would be lowered by 0.27 percentage points from Thursday and the reserve-requirement ratio would be down by 0.5 percentage points from Oct. 15, the People's Bank of China said.

"The deepening U.S.-originated credit crisis has impacted the psychology of Chinese and also the real economy," said Tang Min, deputy secretary of China Development Research Foundation.

The move was also a timely response to the rate cuts by other central banks and part of a coordinated effort to stem the global crisis, he said.

After the coordinated rate cuts, several major stock markets rose tentatively. The stock market in Saudi Arabia, the largest in the region, rebounded at the close and U.S. stock also managed a tentative advance in early trading Wednesday. The effect of the move for Asia-Pacific markets will be seen in the following day.

(Xinhua News Agency October 9, 2008)