Bangkok: Asian stocks headed lower Thursday, stung by a pessimistic assessment of the US economy by the Federal Reserve.
Japan's Nikkei 225 slumped 1.6 per cent to 8,598.32 while South Korea's Kospi index slid 2.6 per cent to 1,806.62. Benchmarks in New Zealand, Singapore and Taiwan were also lower.
Hong Kong's Hang Seng index plummeted 3.6 per cent to 18,138.32, with blue chip property developers among the biggest losers. China Resources Land Ltd. tumbled 10.1 per cent while China Overseas Land & Investment slid 7.9 per cent. China Vanke Co lost 3.8 per cent.
Australia's S&P ASX 200 was 2.2 per cent down at 3,984.40, with energy shares plummeting amid fears of a global economic slowdown. BHP Billiton, the world's largest mining company, lost 3.3 per cent. Rival Rio Tinto Ltd. plunged 5 per cent. OZ Minerals dropped 6.3 per cent.
Falling gold prices hit precious metal stocks. Hong Kong-listed Zijin Mining Group, China's No 1 gold miner, lost 4.9 per cent. Newcrest Mining, Australia's biggest gold miner, fell 2.2 per cent.
Ben Potter of IG Markets in Melbourne, Australia said in a report that he expects "a session of heavy selling as the world reacts to the Fed's downbeat outlook for the US economy."
In a highly anticipated move, the Fed on Wednesday announced it would buy Treasury bonds to help the US economy. But Wall Street stocks fell anyway because the US central bank made it clear that a full US economic recovery was likely years away.
The Dow Jones industrial average lost 2.5 per cent to close at 11,124.84. The Standard & Poor's 500 index fell 2.9 per cent to 1,166.76. The Nasdaq composite fell 2 per cent to 2,538.19.
The Fed said after a two-day meeting that it would buy long-term Treasurys and sell short-term ones to help the economy regain momentum. It surprised investors when it said it would include more 30-year bonds in its purchases than expected.
The Fed said it would buy $400 billion in 6-year to 30-year Treasurys by June 2012. Over the same period, it planned to sell $400 billion of Treasurys maturing in 3 years or less. The move is intended to drive down interest rates on long-term government debt, and could lower rates on mortgages and other loans.
The inclusion of more 30-year bonds than expected means the Fed saw the need to keep very long-term rates lower for an extended period. Many analysts viewed the move as an acknowledgment that the US economy's problems are long-term.
The Fed also bleakly stated that the economy has "significant downside risks" and that a number of problems won't be easily solved, including high unemployment and a depressed housing market.
Meanwhile, the price of oil continued its slide on expectations that there'll be less demand for energy because of the US economy.
Benchmark crude for October delivery was down 99 cents per barrel to $84.92 on the New York Mercantile Exchange. The contract fell $1.00 to settle at $85.92 on the Nymex on Wednesday.
In currency trading, the dollar rose to 76.76 yen from 76.56 yen late Wednesday in New York. The euro fell to $1.3564 from $1.3667.
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