Global rout as $5 trillion wiped off world market

New Zealand shares fell 3 per cent yesterday as Asia-Pacific markets extended a global rout.

The NZX-50 index closed down 101.27 points at 3276.51. In Australia the ASX 200 fell 171.1 points, or 4 per cent, at 4105.4. The MSCI Asia-Pacific Index tumbled 3.8 per cent in Tokyo, set for its largest weekly decline since October 2008.

More than $5 trillion has been wiped from equity market values worldwide amid a sell-off that drove the MSCI All-Country World Index down more than 10 per cent from this year's high into a so-called correction.

"Investors are coming to grips with how dramatically the global and US economies have slowed in recent months," said investment strategist Russ Koesterich of BlackRock.

His firm oversees $4.37 trillion as the world's largest asset manager. "What's really troubling investors is that given the fiscal austerity in Europe and the US and the fact that interest rates are already at zero, it's not clear what steps governments can do to get us out of this."

Just 12 of the MSCI Asia Pacific Index's 1018 members gained as the gauge extended its weekly loss to 8 per cent. That will be the steepest one-week drop since October 2008, when credit markets froze following the bankruptcy of Lehman Brothers a month earlier.

Japan's Nikkei 225 Stock Average sank 3.7 per cent and Hong Kong's Hang Seng plunged 4.8 per cent.

Benchmark indexes for South Korea and Taiwan as well as the MSCI Asia Pacific Index also entered corrections yesterday.

The MSCI All-Country World Index dropped 1 per cent, extending its drop from a May 2 high to 14 per cent. Among the 24 developed nation markets tracked by Bloomberg, only Iceland's benchmark stock gauge has made gains this year.

Around the world
NZX-50: -3.0pc
ASX200: -4.0pc
Nikkei*: -3.7pc
Hang Seng*: -4.8pc
Dow Jones: -4.3pc
FTSE 100: -3.43pc
* During trading yesterday.

- Bloomberg