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Merrill Worries Drag Asian Stocks Lower

Asian markets closed sharply lower Friday, with the exception of China and India, as investors sold down shares after report in the New York Times that Merrill Lynch could suffer $15 billion in losses from soured mortgage investments, almost twice its orginal estimate. Japan shed almost 2 percent and South Korea finished 2.3 percent lower.

Defensive play, gold, hit a record high of $898 an ounce, driven by speculative buying, and was trading around $892 in the afternoon session. Gold and other commodities have started the year strongly, with investment funds diversifying their portfolios to hedge against declining equity markets.

Japan's Nikkei 225 Average fell 1.93 percent to its lowest close since November 2005, pushed down by fears about the Japanese economy and the Merrill Lynch report. Retailers and property shares tumbled, with Tokyu Land down over 7 percent, helping to make the real estate subindex the worst performer on the day.

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South Korea's KOSPI fell more than 2 percent to a seven-week closing low, after that Merrill Lynch report, fanning concerns about fallout from the crisis. Top automaker Hyundai Motor and biggest lender Kookmin Bank both declined.

Australian shares shed 1.6 percent, easing for a fifth straight day as U.S. economic concerns lingered. The fall took the weekly decline to 5.2 percent, the biggest weekly selloff since August, and left the market at near-five month lows as investors marked down financial stocks. The ASX/S&P 200 Index initially advanced in the morning session, but gains swiftly evaporated as investors focused on the negatives, including the Merrill Lynch report in the New York Times that Merrill Lynch could suffer $15 billion in losses from soured mortgage investments, almost twice its orginal estimate.

Hong Kong stocks ended 1.3 percent lower, as shares in mainland telecoms giants fell amid ramped up speculation that Beijing had approved a long-awaited restructuring of the telecoms industry. China Mobile, the country's No.1 wireless operator, suffered further losses and investors pocketed recent gains in China Telecom, the country's fixed-line operator.

Singapore's Straits Times Index was flat with blue chips trading mixed, but banking shares taking a hit.

China's Shanghai Composite Index regained early losses to close half a percent higher. Banking stocks jumped after Bank of Beijing became the latest lender to forecast that 2007 net profit rose by over 50 percent from a year earlier, fueling expectations that overall performance of the industry was strong in 2007.