Stocks in Tokyo hit a 25-year low Tuesday and most major indexes in Asia were down, caught in the downdraft of risk aversion sparked by renewed concern over the global financial sector.
Japan's broad Topix index hit a 25-year intraday low, while the Nikkei slipped to a four-month trough. However, there were signs that some investors were picking up bargains and shaving their safe-haven positions. The MSCI index of Asia-Pacific stocks outside Japan swung from a three-month low to show a small gain on the day and the dollar index backed off a three-year high reached in early dealings.
Financial markets have been shaken this week by concerns that global financial-sector woes are deepening. U.S. insurer American International Group posted a record quarterly losson Monday, and HSBC announced Britain's largest-ever rights issueto bolster its balance sheet.
The Australian dollar jumped after Australia's central bank held its policy interest rate steady at 3.25 percent, surprising some in the market who had thought the latest turbulence in global markets would prompt another easing. The decision boosted the Australian dollar , which was up 1.7 percent on the day. However, there were also signs that investors were trimming safe-haven positions after a run up in the value of these assets. The dollar index, which measures its value against a basket of six currencies, climbed to 89.026 in early Asian trading Tuesday, its highest level since April 2006. Oil held steady above $40 a barrel after tumbling 10 percent on Monday on concerns that a deepening global downturn would cut further into fuel consumption.
The Nikkei 225 Average ended down 0.7 percent, trimming its losses after hitting a four-month closing low as banking shares fell, but investors picked up beaten-down exporters such as Sony. Although the benchmark briefly turned positive in afternoon trade, it hovered just short of a 26-year low amid worries about the U.S. financial system. It slid as low as 7,088.47 in the morning -- a level not seen since the 26-year low of 6,994.90 recorded late last October.
South Korea's KOSPI ended 0.6 percent higher, erasing an earlier 2.55 percent decline, as technology and auto exporters rebounded, helped by lingering weakness in the won, but financials fell on continued global bank worries.
Australian stocks recovered two-thirds of their losses to close down 1 percent after the central bank held interest rates steady, which investors took as a thumbs up for the Australian economy. The market fell through a key support level at 3,200 in early trade. But it bounced back to hold above 3,200, considered an important psychological level as it was 50 percent below last year's high, after the central bank surprised the market by holding rates at 3.25 percent.
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Hong Kong shares closed 2.3 percent lower as Chinese counters picked up pace ahead of China's annual parliamentary session this week, but HSBC plumbed new lows as it shed nearly a fifth of its value. HSBC was down 18.8 percent after opening at its lowest level since the 1998 Asian financial crisis, matching a similar selldown in the bank's London-listed shares. The UK-lender announced a $17.7 billion rights issue at a deep discount on Monday and slashed its annual dividend.
Singapore's Straits Times Index fell back into the red, ending 0.3 percent lower. Shares of Neptune Orient Lines, the world's seventh largest container shipper, was down 5.2 percent after the company said it moved 35 percent less cargo in the six weeks to Feb 6, 2009 from a year ago.
China's ShanghaiComposite Index was down 1.1 percent on concern about the weakness of the U.S. financial system, but it came off its lows after nearing major technical support. Financial, coal and non-ferrous metal shares led the declines, partly on worries that the turmoil in the United States could mean long-term weakness in demand for commodities.