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Asia Tumbles on Europe, Nikkei Down 3%

CNBC.com with Reuters
Tuesday, 25 May 2010 | 3:06 AM ET

Asian stock markets suffered heavy losses on Tuesday, as worries that the euro zone's troubles might spread kept investors wary about holding riskier assets.

Japan's Nikkei average dropped more than 3 percent to its lowest close in six months on Tuesday, as the euro fell further on worries that Europe's woes now included the health of some banks in addition to sovereign debt problems.

The Nikkei's slide was part of a broad sell-off of risk assets including other Asian shares, oil and higher yielding currencies.

It was triggered in part by the Bank of Spain's take over of a small savings bank, and exacerbated by news that North Korean leader Kim Jong-il has ordered his military to be on a combat footing.

The benchmark Nikkei fell 3.1 percent to 9,459.89 points, its lowest finish since Nov. 30. It has lost more than 16 percent since hitting an 18-month high of 11,408.17 in early April.

The broader Topix fell 2.3 percent to 859.82.

Tokyo Electron sank 4.88 percent to 5,070 yen and Kyocera shed 3.2 percent to 7,800 yen.

Shares of Canon declined 2.7 percent to 3,610 yen. The company said it will freeze plans to develop flat panel televisions based on SED (surface-conduction electron-emitter display) technology.

The firm will continue developing SED TVs for commercial use, the spokesman said.

Textile firm Toray Industries tumbled 8.4 percent to 457 yen after it said would raise $1.2 billion from the sale of new and existing shares.

Renown's shares surged 26 percent to 241 yen after Chinese textile group Shandong Ruyi said it will buy a 41 percent stake in the Japanese apparel maker, the latest in a series of investments by Chinese firms in Japan.

The stock had already ended the previous day up 35.5 percent after weekend media reports of the deal.

Seoul Sinks 2.8%

Seoul shares fell 2.8 percent to post their lowest close in 15 weeks, as worsening tensions with North Korea and renewed euro zone fears prompted a profit-locking spree by foreign investors.

The Korea Composite Stock Price Index (KOSPI) ended down 44.10 points at 1,560.83 points, the lowest close since February 8th.

Shares in automakers lost ground as investors took profits.

Hyundai Motor dropped 2.1 percent to 135,500 won and Kia Motors declined 3.7 percent to 28,000 won.

Hyundai Motor shares had gained nearly 15 percent on the year and Kia Motors 45 percent as of Monday's close, versus the broader market's 4.6 percent fall.

Airlines and tour issues trimmed losses after falling sharply earlier when the won fell 4.5 percent against the dollar on Tuesday, prompting concerns a weaker domestic currency may curb appetite for overseas travel.

Shares in Korean Air Line fell 1 percent. Major tour agency Hana Tour lost 1.2 percent, and Modetour shed 2.35 percent.

Australia Tracks Wall Street Lower

Australian stocks ended 2.9 percent lower, tracking weakness on Wall Street as fresh signs of Europe's banking problems deter risk taking.

The benchmark S&P/ASX 200 index slid 130 points to 4,265.3. The index rose 2.1 percent on Monday.

The market has fallen 14 percent from its recent peak in April as the European worries, the Australian dollar's fall and a planned mining tax whacked sentiment.

New Zealand's benchmark NZX 50 index fell 1.8 percent to 3,003.8 points.

Shares have faced the additional burden of uncertainty over mining investment plans following harsh comments by CEOs on the government's planned resource profits tax, which
has put off foreign investors and hammered the currency.

The materials sector was the biggest detractor on the broader market, with top miner BHP Billiton down 4.0 percent at A$36.28.

Banks saw steep losses as well. Westpac dropped 3.9 percent to A$22.26.

Against the trend, Ivanhoe Australia shares jumped over 12 percent and closed up 5.4 percent at A$3.35 after the firm said it had acquired some copper exploration ground from Barrick Australia.

Flight Centre rose 2.9 percent to A$16.80 after the travel firm upgraded its profit guidance for 2010 to a pretax profit of A$190 million to A$200 million, up from forecasts of a profit of A$160 million-A$180 million.

Healthscope's shares slip 1.9 percent to A$5.15, after private equity firm Blackstone Group joined a group bidding $1.5 billion for the Australian hospital operator, a source familiar with the situation said.

Prudential Debuts in HK

Hong Kong stocks retreated 3.0 percent, giving up slight gains from the previous session, on concern about the eurozone's financial system after Spain's bailout of a small bank.

The benchmark Hang Seng Index fell 598 points lower at 19,070.6.

Shares of British insurer Prudential fell in early trade in a weak Hong Kong market after debuting at HK$59.70, consistent with their London close.

Prudential, which is buying American International Group Asian life insurance business for $35.5 billion, aims to raise $21 billion from a rights offering to fund the biggest insurance deal in history.

Listing shares in Hong Kong and Singapore is aimed at winning support from Asian investors, who are expected to be key to the success of the rights issue.

The Hong Kong shares opened at HK$59.70, based on Prudential's London-listed shares close of 530.00 pence on Monday, according to a Hong Kong stock exchange release.

Prudential shares were trading at HKD $58.80 shortly after, tracking an almost 2 percent fall in the benchmark Hang Seng Index.

Denway Motors lost as much as 7 percent, despite news that Templeton, its largest minority shareholder, is supporting a controversial plan by Denway's parent to take the company private.

Denway shares have tumbled 27 percent since last week, when Guangzhou Auto first announced its plan to take Denway private. Investors expressed concern over the valuation of the deal, which would see Denway shares swapped out for Guangzhou Auto shares ahead of a listing in Hong Kong by Guangzhou Auto.

Chinese Property Stocks Fall

China's key stock index fell 1.9 percent, weighed down by a pullback in property shares from the previous day's rally as uncertainty lingered over the outlook for further measures to rein in real estate prices.

Local media on Tuesday widely reported a denial by a government researcher of a newspaper article the previous day, which quoted him as saying a new property tax would not be implemented for three years.

The report in the Beijing-based tabloid China Times had sparked a 4.6 percent surge in the Shanghai property sub-index on Monday.

China's benchmark Shanghai Composite Index shed 50.79 points to 2,622.63, after closing up 3.5 percent on Monday in its biggest one-day percentage rise in more than seven months.

The index has been one of the worst performers in Asia and is down 19 percent on the year.

The property sub-index fell 2.3 percent, with property firm Gemdale, the most active share in the Shanghai index, down 4.0 percent.

Sector heavyweight China Vanke, the most active share on the Shenzhen exchange, fell 2.9 percent.

Taiwan stocks fell 3.23 percent to a nine-month closing low, led by heavyweights such as Hon Hai, as moresigns of banking problems in Europe raised concerns about the health of the global economy and demand for electronics goods.

Growing tensions between North and South Korea further weighed on the market.

The main TAIEX share index ended down 236.36 points at 7,086.37, a level not seen since early September. It recorded its biggest one-day percentage fall this year.

Hon Hai Precision, a major supplier of Dell and Apple, sank 5 percent.

Markets in Singapore and Malaysia mirrored losses in the regional, with the STI down 1.9 percent and KLCI falling 1.3 percent.

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