INO.com News - DJ Asian Shares End Down; Dubai Worries Propel Yen, Sink Stocks (djn)

DJ Asian Shares End Down; Dubai Worries Propel Yen, Sink Stocks

SINGAPORE (Dow Jones)--Asian stock markets slumped Friday, with some suffering their worst losses in months, amid concerns about the potential fallout from Dubai World's debt standstill.

Bank and construction stocks led decliners. The impact was also felt across other asset classes, with gold and oil prices suffering a decline, as did currencies viewed as riskier bets.

The Australian dollar fell under US$0.90, while the Japanese yen--viewed more as a safe-haven currency--hit another 14-year high against the greenback and gained against other major currencies. The yen's rise hurt shares of exporters in Tokyo.

"Some of the China funds are being sold by Middle East investors...It is expected that Middle East investors may be trying to unload portfolios globally to raise money," said Peter Lai, director at DBS Vickers.

Patrick Bennett, Asia rates strategist at Societe Generale, added: "Fallout from Dubai World seeking a debt moratorium has been broad. It is not the amount involved but potential contagion that will drive markets."

Japan's Nikkei 225 Average fell 3.2% to 9081.52 and Hong Kong's Hang Seng Index slumped 4.8% for its worst percentage fall since March. South Korea's Kospi sank 4.7% for its deepest percentage fall since January.

Australia's S&P/ASX 200 ended down 2.9%, Taiwan's Taiex gave up 3.2% and China's Shanghai Composite ended down 2.4%, while India's Sensex was down 1.4% in afternoon trading. Markets in Singapore, Malaysia and Indonesia were shut for a holiday.

Regional markets were tracking declines Thursday in Europe after Dubai World, the city state's largest corporate entity, asked creditors for a six-month standstill on debt repayments of $59 billion. Markets were also volatile after the U.S. market holiday Thursday, with Dow Jones Industrial Average futures recently 225 points lower in screen trade.

"Year-end window dressing has taken a rather nasty turn, with risk being furiously sold as sentiment soured sharply," said David Watt, senior currency strategist at RBC Capital Markets.

Financials across the region took a hit amid concerns about banks' potential exposure to Dubai World's debt and other debt issued in Dubai more generally. Major banks in Australia were down sharply, with National Australia Bank off 4% and Westpac Banking Corp. down 3.8%.

In Hong Kong, HSBC fell 7.6% and Standard Chartered slumped 8.6%, with Shinhan Financial down 6.3% in Seoul and ICICI Bank falling 1.7% in Mumbai trading.

That's even as banks in Asia said their exposure to Dubai--if any--was mostly small, and some analysts said markets were using the Dubai news as an excuse to sell into gains.

Construction stocks were also caught up in the selling, with Daewoo Engineering & Construction falling 8.3% and Hyundai Engineering & Construction losing 6.9% in Seoul. In Mumbai, DLF fell 0.7% while engineering major Larsen & Toubro dropped 2.9%.

S.P. Tulsian, an investment adviser in Mumbai, said the impact from the news was mostly "sentimental."

"India and Dubai have some common investors in real estate, and some Indian developers have a good presence in Dubai as well. To what extent they'll be hurt is difficult to say, but [the news] will have a chain effect on development of ongoing [real estate development] projects as well," he said.

Japanese exporter stocks were weaker as the yen gained, with Honda Motor down 3.8%, Sony down 4.4% and Canon off 2.7%. The greenback went below 86 yen in early trade and hit a 14-year low of 84.82 yen before recovering. Mizuho Securities market analyst Yukio Takahashi said many Japanese exporters have based their earnings outlooks on the assumption of the U.S. dollar at 90 yen, with a few conservative firms basing theirs on 85 yen.

Japan's finance minister Hirohisa Fujii stepped up his rhetoric against excessive yen rises, calling the currency's recent climb "one-sided."

Still, Societe Generale's Bennett said currency market intervention from Japan was off the cards for now. "Japanese official comments have been prominent on the newswires and while more specific in tone than the last couple of days, we would still expect some ratcheting higher in tone before physical action is taken."

Elsewhere in currency markets, the euro was at $1.4898, from $1.5009 late in Toronto Thursday, and at 128.85 yen, from 129.74 yen.

Resource stocks were taking a hit as the general pullback from risk sent commodity prices lower. Rio Tinto was down 3% and BHP Billiton off 3.4% in Sydney. In Tokyo, Sumitomo Metal Mining fell 6.3% and Aluminum Corp. of China sank 6.2% in Hong Kong.

Spot gold was recently at $1,153, down $39.10 a troy ounce from the London afternoon fixing. Front-month Nymex crude oil futures tumbled $4.07 on Globex to $73.89 a barrel.

Lead December Japanese government bond futures were higher on the stronger yen. Futures gained 0.32 to 139.82 points with the 10-year cash JGB yield down 3.5 basis points at 1.245%.

-Dow Jones Newswires; +65-6415-4140; markettalk@dowjones.com

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(END) Dow Jones Newswires

November 27, 2009 05:02 ET (10:02 GMT)