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Published: Friday November 27, 2009 MYT 7:21:00 AM
Updated: Friday November 27, 2009 MYT 1:16:35 PM

Asian stocks tumble Friday amid US$ slump, Dubai fears(update)


U.S. markets were closed Thursday for the Thanksgiving holiday. But Friday is likely to be a rough session on Wall Street with futures pointing sharply lower. Malaysian and Singapore markets were closed Friday for Muslim holiday

HONG KONG: Asian stock markets tumbled Friday in early trade as the US dollar continued its slide against the Japanese yen and worries over losses from Dubai's debt problems unnerved investors worldwide.

It was the region's second day of losses and followed a rout in European markets. Oil, meanwhile, dived below $76 a barrel.

Investors cut back their riskier bets on equities and commodities after Dubai World, the emirate's main development engine, announced it was asking creditors to delay paying back its $60 billion debt.

The news triggered fears of a massive default and a wave of heavy losses at banks and companies holding its debt.

Also dampening the mood was the slumping dollar, which weakened to a new 14-year low below 85 yen, dragging down shares of Japan's exporters like automaker Nissan and electronics maker Sharp.

"Investors were searching for shelter against the increased volatility and falls in risky assets," Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong, said in a note.

"Many chose to opt for the Japanese yen."

In Tokyo, the Nikkei 225 stock average fell 184.94 points, or 2 percent, to 9,198.30 and Hong Kong's main index retreated 712.04 points, or 3.2 percent, to 21,501.41.

Elsewhere, South Korea's Kospi benchmark lost 2.6 percent to 1,557.45 and Australia's index dropped 2.8 percent.

China's main Shanghai stock measure was off 1.1 percent.

Uncertainty over the fallout from Dubai World's financial troubles sent European markets plummeting Thursday, with benchmarks in Britain, Germany and France all losing more than 3 percent.

U.S. markets were closed Thursday for the Thanksgiving holiday.

But Friday was likely to be a rough session on Wall Street with futures pointing sharply lower.

Dow futures were down 192, or 1.8 percent, to 10,250.

Oil prices retreated in Asian trade, with benchmark crude for January delivery falling $2.01 to $75.95 a barrel.

The dollar was lower at 86.13 yen from 86.54 yen after swooning as low as 84.81.

The euro fell to $1.4931 from $1.5021. - AP

Earlier report

World markets tumble on Dubai debt fears

LONDON: World stock markets tumbled Thursday as investors fretted over the debt problems at Dubai World, a government investment company, and the continuing slide in the dollar, which earlier fell to a 14-year low against the yen.

Markets are usually relatively quiet when Wall Street is closed for a holiday, as it is Thursday for Thanksgiving Day.

Not so today, as the rest of the world digested the stunning news from Dubai that the government's flagship investment company was in financial trouble.

European markets followed Asia lower with the FTSE 100 index of leading British shares closing down 170.68 points, or 3.2 percent, at 5,194.13, having been out of action earlier for over three hours because of technical problems.

Germany's DAX fell 188.85 points, or 3.2 percent, to 5,614.17.

The CAC-40 in France was 129.93 points, or 3.4 percent, lower at 3,679.23.

Sentiment in stocks was dented by the news that Dubai World, which is thought to have debts totaling around $60 billion, has asked creditors if it can postpone its forthcoming payments until May.

That stoked fears of a potential default and contagion around the global financial system, particularly in banks and emerging markets.

"Fear of sovereign default in the Middle East rattled the markets," said Jane Foley, research director at Forex.com.

Banks bore the brunt of the selling in Europe, amid fears of potential exposure to Dubai.

In London, Royal Bank of Scotland PLC was down nearly 8 percent, making it the biggest faller on the FTSE.

In Germany, Deutsche Bank was the biggest faller on the DAX, down around 6 percent.

Investors were also keeping a close eye on associated developments in the currency markets after the dollar slid to a new 14-year low of 86.27 yen, while the euro pushed up to a fresh 15-month high of $1.5141.

By late afternoon London time, the dollar had recouped some ground and was trading at 86.55 yen, down 0.9 percent on the day, while the euro was 1 percent lower at $1.4988.

The continued appreciation in the value of the yen continued to dent Japanese stocks as investors worry that the rising currency will have a detrimental effect on the country's exports. Japan's Nikkei 225 stock average fell 58.40 points, or 0.6 percent, to 9,383.24.

Kit Juckes, chief economist at ECU Group, said the developments in Dubai and in the currency markets are related as the fall in risk appetite has pushed money into government bonds and into safe haven currencies such as the Swiss franc and the yen.

This, he said, is "testing the tolerance of central banks to see their currencies cause further damage to their economies."

Already there have been unconfirmed reports that the Swiss National Bank has intervened to buy dollars to prevent the export-sapping appreciation of the Swiss franc.

Meanwhile, Japanese Finance Minister Hirohisa Fujii tried to assure the market he was closely monitoring the situation and would "take appropriate steps if foreign exchange rates move abnormally."

But that did little to ease investor worries.

Across all markets, there is a growing awareness that investors may use the upcoming year-end to lock-in whatever profits have been made over the last 12 months.

Gold has been one of the biggest high-flyers over the last few months, having gained over 10 percent in November alone.

It continued to rise Thursday as investors bought it up as a safe haven.

It hit a new record high earlier of $1,196.8 an ounce, before falling back modestly.

By late afternoon London time, gold was down 0.4 percent at $1,182.50 an ounce.

Oil also fell alongside stocks - the two have traded alongside each other for much of this year.

Benchmark crude for January delivery was down $1.85, or 2.4 percent, at $76.11 a barrel.

On Wednesday, it rose $1.94.

Earlier in Asia, the Shanghai index tanked 119.19 points, or 3.6 percent, to close at 3,170.98, its biggest one-day fall since August 31, while Hong Kong's Hang Seng shed 1.8 percent to 22,210.41.

Elsewhere in Asia, markets in Australia, Singapore, Taiwan and Indonesia closed lower.

(Malaysian, Singaporean and some other markets were closed Friday for a Muslim holiday) - AP


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