Asian Markets Drop Sharply, Financials Drag

Asian markets took a beating Tuesday, weighed by the financial sector after sharp declines in shares of Fannie Mae and Freddie Mac in the U.S. on funding concerns reminded investors about the fragility of global credit markets.

Oil rose by more than half a dollar, rebounding from the previous day's near $4 plunge as the U.S. dollar weakened. But the sharp decline in crude prices overnight dragged down energy-related stocks.

A Lehman Brothers research report said a pending accounting change could force Fannie Mae and Freddie Mac -- that both have the U.S. government's implicit backing -- to raise a combined $75 billion in capital. Banks such as Japan's Mizuho Trust & Banking and South Korea's Shinhan Financial were losing ground.

Japan's Nikkei 225 Average slid 2.5 percent to its lowest close in nearly three months, dragged down by financials such as top lender Mitsubishi UFJ Financial Group amid renewed credit fears.

South Korea's KOSPI plunged 2.9 percent with renewed global credit worries and jitters over upcoming company earnings dragging the main index down to its lowest in 14 months, with falls led by financials and construction issues. Shares in Kookmin Bank, the nation's largest commercial lender fell 8.64 percent, its lowest in about 14 weeks.

Australian shares fell 1.4 percent to a near two-year low, with financials such as Macquarie Group hit by credit concerns, while property shares fell for a second day on a bleak earnings outlook.

Hong Kong shares slid 3.2 percent to a 15-week low, with all the Hang Seng Index stocks in the red, as investors dumped blue chips in the absence of any market-boosting measures from China. Bourse operator Hong Kong Exchanges & Clearing tumbled 5.9 percent to its lowest level since mid-August 2007, as analysts slashed their target price on the stock on dwindling turnover. Index heavyweights joined in the slide, with China Mobile falling 2.7 percent and HSBC Holdings dropping 2.4 percent.

Singapore's Straits Times Index was down 1.7 percent. Shares in shipping line Neptune Orient Lines fell sharply after the surprise departure of its chief executive ahead of a possible $7 billion bid for German shipping giant Hapag Lloyd.

China's Shanghai Composite Index closed 0.8 percent higher as coal shares rebounded on moderately positive news about tax policy. Shenhua Energy rose over 3 percent after dropping 11.20 percent over the previous two trading days.