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Asian Shares Slump on U.S. Mortgage Woes
SINGAPORE—Asian shares slumped on Wednesday, tracking heavy losses on Wall Street on fears about an intensifying crisis in U.S. mortgage lending that spooked investors nursing losses from a sharp sell-off two weeks ago.
Japanese stocks fell 3 percent and other regional markets dropped between 1.5 percent and 3 percent, mirroring falls in U.S. stocks that were triggered by growing losses at subprime lending firms—those operating at the riskier end of the home loan market—and weak U.S. retail sales.
"Clearly the U.S. markets are having an impact in... Asian markets," said Lee Wo-hyun, an analyst at Kyobo Securities in Seoul. "But this time, the problems seem more contained to a specific sector of the U.S. housing market, so there's a feeling that the broader impact could be more limited."
The yen held gains, after soaring to near a three-month high versus the dollar as the latest jitters prompted investors to close out trades funded by cheap loans in the Japanese currency.
"Most people are just headless and panicking and don't know what they want to do," said Axel Merk, portfolio manager at Merk Hard Currency Fund in Palo Alto, California.
The 10-year Japanese government bond yield slid to a 2-1/2-month low after U.S. Treasuries rallied on concerns the troubled subprime mortgage sector could hurt the wider economy.
Oil steadied near $58 a barrel, after dropping sharply on Tuesday on concerns a flagging U.S. economy would hit demand, and gold fell further as the wave of risk aversion spread to commodity markets.
Global markets had been showing signs of a tentative recovery from a slide that began at the end of February, when steep losses in Chinese stocks combined with worries about slowing U.S. growth to spark a worldwide flight from riskier assets.
Stronger Yen Weighs
Tokyo's Nikkei fell 3 percent in morning trade, still nearly 1 percent above its 2007 low touched on March 5.
"The Japanese market is weighed down by a fall in U.S. stocks and a stronger yen," said Yutaka Miura, deputy manager of the equity information department at Shinko Securities. "The sell-off is likely to continue for a while."
MSCI's broadest index of shares elsewhere in Asia fell 2.4 percent by 0230 GMT, but remained more than 3 percent above its 2007 lowpoint reached on March 6.
Australia's S&P ASX 200 fell 1.8 percent and Hong Kong's Hang Seng slid 2.7 percent.
Benchmarks in South Korea, Taiwan and Singapore fell between 1.7 and 2.8 percent.
Shares in exporters led the losses in several markets, hurt by the rising yen—which eats into overseas earnings—and worries of flagging demand in the crucial U.S. market.
In Tokyo, Honda fell 3.8 percent, rival car maker Toyota lost 3.2 percent and Canon shed 3 percent, while in Seoul, Samsung Electronics dropped 2.5 percent.
The Dow Jones industrial average lost 2 percent on Tuesday and the Nasdaq Composite Index fell 2.2 percent.
Losses came as the proportion of mortgages in the initial stages of foreclosure rose to the highest rate on record and the chief executive of a large U.S. home lender said the subprime industry—which caters to borrowers with weak creditmdash;was in a "liquidity crisis".
Gains for the yen suggested a shakeout two weeks ago in carry tradesmdash;a strategy in which investors borrow where interest rates are low to buy higher-yielding assets or currenciesmdash;has yet to run its course.
"Concerns about the subprime market have triggered a resumption in risk-aversion trades seen at the beginning of the month," said Hiroshi Yoshida, foreign exchange trader at Shinkin Central Bank.
The dollar bought around 116.20 yen at 0230 GMT, down a touch after falling more than 1 percent on Tuesday. The dollar had fallen as low at 115.88 earlier on Wednesday, edging toward the 115.16 yen level touched earlier in the month for the first time since December.
The euro was down at 153.15 yen, after also tumbling more than 1 percent in the previous session.
The benchmark 10-year Japanese government bond yield was down 2.5 basis points at 1.580 percent, the lowest since late December.
"Both Japanese bonds and stocks are reacting to yesterday's moves in the United States," said Tatsuo Ichikawa, a JGB analyst at ABN AMRO securities.
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