MUMBAI (Thomson Financial) - (Adds closing levels throughout)
Asian stocks extended losses Tuesday after U.S. equities fell amid persistent
credit concerns, with banking stocks such as Mitsubishi UFJ Financial Group
leading the decline.
Stocks got off to a weak start after the Dow industrials ended at a two-year
low as the latest plan by the U.S. government to bail out the nation's two
biggest mortgage financiers, Fannie Mae and Freddie Mac, failed to fully
convince investors about its effectiveness.
"Washington's moves to shore up confidence in the mortgage companies didn't
give as much comfort to investors as previously thought," said Kwak Joong-bo, an
analyst at Hana Daetoo Securities in Seoul.
"Rather, they seemed to view the efforts as confirmation of the gravity of
the troubles in the U.S. financial sector." More time is needed for the market
to recover and short-term investors would be better off if they take a
conservative stance, said Kwak.
"What investors can do for the moment is just hope that key U.S. investment
banks would not deliver earnings shocks." Wells Fargo & Co. on Wednesday and
JPMorgan Chase & Co. on Thursday are expected to report profit declines.
Citigroup Inc. -- the nation's largest bank by assets -- is expected to post its
third straight quarterly loss.
The Nikkei 225 index fell 2 percent to 12,754.56 and the Topix slipped 2.2
percent to 1,253.12.
A Nikkei newspaper report that Japan's three megabanks had some 4.7 trillion
yen ($44.2 billion) in debt securities issued by Fannie Mae and Freddie Mac as
of March 31 added to the gloom.
Mitsubishi UFJ Financial lost 5.3 percent to 926 yen, Mizuho Financial Group
fell 5 percent to 511,000 yen and Mitsui Sumitomo Financial Group lost 6.1
percent to 784,000 yen.
In South Korea, Shinhan Financial Group fell 5.2 percent to 42,650 won,
Woori Finance Holdings tumbled 5.8 percent to 14,550 won and Hana Financial
Group ended down 3.9 percent at 36,000 won. The Kospi closed down 3.2 percent at
1,509.33.
The S&P/ASX was down 2.1 percent at 4,815.7 and the All Ordinaries was down
2 percent at 4,910.1, with Commonwealth Bank down 3.6 percent at A$38.71,
National Australia Bank sliding 3.1 percent to A$25.66, Australia and New
Zealand Banking Group off 2.9 percent at A$17.29 and Westpac down 4.8 percent at
A$18.46.
The Hang Seng index gave up 3.8 percent to close at 21,174.77 and the
Shanghai composite index was down 3.4 percent at 2,779.45.
"Sentiment on banking stocks is sour. Investors are worried that Chinese
banks have investments in the two U.S. mortgage lenders, Fannie Mae and Freddie
Mac," said Yu Kei Lee, analyst at Core Pacific-Yamaichi in Hong Kong.
Concerns about investments in assets linked to the subprime mortgage market
in the U.S. resurfaced this month after Lehman Brothers said Fannie Mae and
Freddie Mac would need additional capital.
The U.S. Treasury's announcement of plans to rescue Fannie Mae and Freddie
Mac further fuelled fears that the subprime crisis may have intensified. The
federal government on Friday said it has taken over mortgage lender IndyMac
Bancorp.
On Monday, the Dow Jones industrial average fell 45.35, or 0.41 percent, to
11,055.19 after spiking nearly 140 points in early trading.
Worries over Fannie Mae and Freddie Mac on Friday led to a volatile session
during which the Dow dipped below the 11,000 mark for the first time in about
two years before paring its losses, suffering its fourth straight losing week.
Broader stock indicators also dropped Monday.
The Standard & Poor's 500 index fell 11.19, or 0.90 percent, to 1,228.30,
and the Nasdaq composite index fell 26.21, or 1.17 percent, to 2,212.87.
Elsewhere in Asia, the Philippine composite index was down 1.8 percent at
2,413.26, and the Jakarta composite index closed down 2 percent at 2,214.85.
The Taiwan weighted index fell 4.51 percent to 6,834.24, while India's
benchmark Sensex provisionally closed 5.38 percent lower at 12,612.77.
The Straits Times Index (STI) closed 2.5 percent lower at 2,830.75, while
the Kuala Lumpur Composite Index (KLCI) closed down 1.4 percent at the day's low
of 1,127.60.
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