Seoul, South Korea
Korean stocks suffered a major blow, ending down 4.4 percent Tuesday, following a 3.3 percent fall the previous day. It was the biggest percentage loss in five months. Trading started with a panic sell-off in reaction to the global equities turbulence and was later suspended for five minutes as the benchmark KOSPI index plunged more than 6 percent. But the market picked up by the close, which analysts said was due to solid economic fundamentals.
"There's huge psychological affliction here. The Korean stock market can sometimes be irrational, like a lemming effect. The KOSPI tends to mirror the Dow for no reasonable reason," said Thomas Shin, Head of Bain & Co. in Seoul.
Senior financial officials will hold an emergency meeting Wednesday to decide whether measures are needed. The U.S. Federal Reserve's wider-than-expected rate cut is expected to have a positive impact in calming the panic in Seoul. Analysts said as long as the New York Stock Exchange reacts to the rate cut, the KOSPI will see a technical rebound, especially due to strong exports and a strengthened Korean win against the U.S. dollar.
After crashing to a record low Monday, India's Sensex market opened Tuesday only to plunge again within minutes, this time dropping 11 percent before triggering an automatic halt for one hour.
The market did recover later in the afternoon to close down about 5 percent. At one point during the day, 1,190 of the index's 1,198 stocks were down.
It is clear that India, despite being one of the fastest-growing economies in the world, is not immune to the global economic woes.
Indian Finance Minister Palaniappan Chidambaram continued to urge investors to "remain calm" and ignore the turmoil in Western markets. He said the Indian economy was expected to grow at 9 percent this year and 8.5 percent next year.
The financial crisis in the United States has spread global fears, including in India, which relies on the United States for exports and outsourcing contracts.
"The rate cuts will soothe a little bit of jangled nerves at this time. I think it will have a definite positive impact on the market and also the Asian markets, because there's been a very sharp 30 percent drop across Asia," said Ketan Gandhi, 43, director of financial services for Pioneer Invest Corp., a financial services and brokerage house based in Mumbai. "So it will kind of sentimentally help improve things."
While Gandhi said there could be a knee-jerk instantaneous improvement tomorrow, he believes the market will even itself out over the next week to 10 days.
The global money crunch has even taken a bite out of the oil-rich countries of the Arabian Gulf. Saudi Arabia's stock market, the largest index in the Arab world, fell a record of nearly 10% in Tuesday's trading. In Dubai the .DFMGI benchmark ended down 6.21%, while neighbor Abu Dhabi's index fell 6.83% -- its largest one-day drop in history. Elsewhere in the Gulf Qatar fell 7.76% while Oman dropped 8.33%.
"This is almost mayhem," Shakeel Sarwar of Bahrain's SICO investment bank told Al Arabiya news channel. "We didn't even see this in the crash of 2006."