Japanese and European investors played no major role in the New York market's historic plunge on Monday, according to securities firms that specialize in their transactions.
Most foreign investors simply stood by and watched, paralyzed by the scope of the 508-point fall, they said.
On Monday, with the fall proceeding full steam, some Democrats on Capitol Hill said that a selloff was being fueled by foreigners who were "losing confidence" in the United States.
But interviews suggest there were no huge sell orders placed from Japan or Europe on Monday, and that in fact their market activity was slower than usual that day. In some cases in following days, foreigners became buyers and helped in a small way to move the market up from Monday's low point.
"Everybody, worldwide, has been mesmerized by the rapidity of the fall," said Julian Healing, director of international equities at Kleinwort Grieveson Securities, a major British securities house. "And that has actually prevented major institutions from making major moves."
With their bank accounts fattened by years of trade surpluses, the Japanese have become big-time investors in the United States in recent years. Japanese Ministry of Finance figures show net acquisitions of private and government securities here at $40 billion in the year that ended March 31, 1986, and $51 billion in the following year.
Much of that money has gone into U.S. government securities. The stability-conscious Japanese prefer fixed yields and the backing of the U.S. government. Recently, however, they have taken new interest in private stock.
Ministry figures show gross acquisitions by Japanese in this field in all foreign countries rising from about $18 billion in April 1986 to $29 billion in April this year.
Tokyo's stock exchange was the first to reopen on Monday after Friday's losses worldwide. It suffered a record decline in moderate trading. But when the New York market opened 13 hours later, Japanese securities companies here say, there were no huge sell orders waiting.
Daiwa Securities America Inc., a subsidiary of Japan's mammoth Daiwa Securities Co., processed only about $55 million of sales on behalf of Japanese clients, excluding traders, on Monday, according to its chairman, Takuro Isoda. Purchases that day for Japanese clients were at about the $10 million mark, he said.
On Tuesday, the day the markets began to rebound, his company sold about $20 million and bought about $100 million of stock on behalf of Japanese clients, Isoda said.
"If the decline had continued for two days -- Monday and Tuesday -- Japanese investors, including individual investors, would have had some type of panic situation," said Isoda. But instead, the market started turning up on Tuesday.
Toshio Mori, chairman of Nikko Securities Co. International Inc., an affiliate of Nikko Securities Co. of Japan, said the Japanese feel too new to the U.S. equity markets to respond. "They stepped back and waited," said Mori. "... Until you build your portfolio to a certain degree, you are not in the stage when you like to trade," he said.
Bond markets, where the Japanese are much bigger players, also showed no sign of a foreigners' panic during the week.
The Europeans, in particular the British, have long been major players in U.S. private equities, dating to the 19th century. Their stake has increased considerably since the British government liberalized capital flows in 1979 and has risen to levels much higher than those of the Japanese, though precise figures are not available.
Securities firms say the British reacted in the same way Monday, by waiting. "There was certainly no overwhelming selling tendency," said Nicholas Allan, senior vice president at Kleinwort Grieveson's New York office. "If anything, we had a quieter week than usual."
He suggested that one reason was that mutual funds play a smaller role in British holdings here, making the British less concerned about redemption.
Sir Gordon White, chairman of Hanson Industries, the wholly owned U.S. subsidiary of the giant U.K.-based Hanson Trust, said his people have not sold any of their approximately $150 million in U.S. equities during the past week.
While analysts believe that foreigners' stake in U.S. equities has remained basically the same this week, many feel there will be a new reluctance to commit more money here. "They will turn out to be somewhat cowardly," predicted Isoda of Nikko of his Japanese clients. "We will really have to wait for some time" before business picks up to the old levels, he said.
Another crucial test could come in November, when the U.S. Treasury is expected to auction around $28 billion in bonds in a new quarterly issue. Analysts will be watching to see how big a share the foreigners take.
Washington Post correspondents Karen DeYoung in London and Margaret Shapiro in Tokyo contributed to this report.