Asia Stocks Fall in Worst Rout for 21 Years as Bailout Rejected

By Kyung Bok Cho and Shani Raja

Sept. 30 (Bloomberg) -- Asian stocks dropped, extending the worst global sell-off in 21 years, after the rejection of a $700 billion plan to rescue the financial system by U.S. lawmakers exacerbated concern more banks will fail.

Australia & New Zealand Banking Group Ltd. and Woori Finance Holdings Co. slumped more than 7 percent after Wachovia Corp. was sold to Citigroup Inc. as its shares collapsed under the weight of overdue mortgages. BHP Billiton Ltd. and SK Energy Co. declined after oil fell the most in almost seven years on speculation the global economy will slide into recession, and after U.S. stocks yesterday tumbled the most since the 1987 crash.

``Volatility in the market has been notched up to a new high,'' said Prasad Patkar, who helps manage $1.8 billion at Platypus Asset Management in Sydney. ``This package is critical and it seems to be getting bogged down for political reasons. Credit markets are dysfunctional at the moment and if they aren't normalized quickly we have a serious problem.''

The MSCI Asia Pacific Index retreated 0.8 percent to 110.42 as of 9:06 a.m. in Tokyo. Japan's Nikkei 225 Stock Average lost 3 percent to 11,395.88. Benchmark indexes in Australia and South Korea declined more than 3 percent.

The regional gauge has fallen 30 percent this year as credit turmoil has caused the world's financial institutions to report more than $590 billion in losses and writedowns.

The Standard & Poor's 500 Index tumbled 8.8 percent yesterday, while the MSCI World Index of 23 developed markets slid 6.9 percent, the biggest loss in 21 years. S&P 500 futures lost 0.1 percent in after-hours trading.

The U.S. House of Representatives yesterday voted down the financial-rescue proposal that President George W. Bush said is needed to prevent the world's largest economy from slipping into a recession.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.