Asian stock markets tumbled on Friday as concerns about a new international banking crisis erupting in Dubai rattled investor confidence. Hong Kong led the way with a 4.8 percent dive, while other major indices in Tokyo, Taipei and Seoul declined over 3 percent each.
On Wednesday, Dubai said it wanted creditors to agree to delay loan repayments at state-owned Dubai World and property group Nakheel.
The news prompted a huge sell-off in Europe and Asia caught the chill. The region's financials were hammered on the possibility of debt defaults from Dubai. Construction stocks also took a battering, especially those with projects in the Gulf.
Hong Kong's Hang Seng index sank 4.8 percent as banks with significant overseas exposure came under intense pressure. The benchmark index lost more than 1,000 points, to close at 21,134.5. HSBC fell to a three-week low, down 7.6 percent from its previous close. Standard Chartered slumped as much as 8.6 percent to HK$189.4 a share.
South Korea's KOSPI fell 4.7 percent to a four-month closing low as anxiety over Dubai's debt problems spilled over to the country. The benchmark index lost 75 points to 1,524.50 points, led by foreign selling in financials and construction firms. KB Financial lost 7 percent and Shinhan Financial tumbled 6 percent.
Shares of construction firms dropped sharply, such as Samsung C&T, which lost sank 8.3 percent. Hyundai Engineering & Construction fell 6.8 percent.
Japan's Nikkei Average sank 3.2 percent on Friday while the Topix closed 2.4 percent lower. A wide range of shares fell after the dollar touched a fresh 14-year low against the yen and debt problems in Dubai hit financial markets and European shares.
Honda Motor and other exporters skidded on the stronger yen, while Japan's top bank Mitsubishi UFJ Financial Group slipped 2.2 percent as banking shares were hit by concerns about their exposure to troubled Dubai's debt.
Japan's Obayashi Corp was a big drag on the Nikkei. Its shares dived as much as 12 percent before closing down 8.6 percent, following a brokerage downgrade partly on concerns about a project in Dubai.
Wall Street was closed for the Thanksgiving holiday on Thursday, but U.S. stock futures were down about 2 percent. The pan-European FTSEurofirst 300 index dropped 3.3 percent.
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The dollar hit its lowest level in 14 years against the yen as investors unwound risk trades amid concerns about debt problems in Dubai. The greenback fell as far as 84.82 yen
before rebounding back above 86.00. The stronger yen eats into exporters' profits when
repatriated.
Australia's S&P/ASX 200 fell 2.9 percent, suffering its biggest one-day drop in five months in a broadbased selling led by financials. The benchmark index lost 136.5 points to close at 4,572.1. It dropped to a three-week low of 4,562.7 at one point.
While Australian firms have little direct exposure to investment from Dubai, stocks that have run up sharply in recent weeks were all hit hard, including financial stocks and retailers.
Top lender National Australia Bank was down 4.0 percent at A$27.01 and investment bank Macquarie Group dropped 5.1 percent to A$45.34. Westpac, ANZ, NAB and Macquarie on Friday moved to distance themselves from any exposure to Dubai.
"Dubai is a real shock to the market. Everybody's been playing the risk trade and this is a reminder of what went on during the global financial crisis," said Constellation Capital
Management investment manager Richard Morris.
"This will cause a shifting back to a more defensive stance. Everything the market views as cyclical or high beta is getting hit pretty hard," he said.
Traders said that with many equity markets in the Middle East and Asia on holiday today, they expected additional fallout from Dubai next week.
Top miners BHP Billiton was the key laggard on the index. It fell 3.4 percent and Rio Tinto lost 3 percent. Newcrest Mining shed 2.8 percent.
Retailers, which have enjoyed a steep rally in recent weeks on hopes of a good Christmas, saw big percentage falls and investors took profits. Harvey Norman fell 3.8 percent and JB Hi-Fi lost 2.3 percent.
New Zealand appliance maker Fisher and Paykel Appliances dived as much as 9.2 percent to NZ$0.59 after the company reported a first-half loss on asset writedowns and weak sales, but said it expected a pick up in the second half.
Taiwan's Taiex retreated 248 points to 7,490.91, as the news from Dubai hit sentiment hard. Investors dumped financials such as mid-cap Shin Kong which fell 5.8 percent. Chinatrust lost 6.1 percent. Cathay Financial, Taiwan's largest financial holding firm, ended down 3.78 percent at a six-week low. Firms that revealed their exposure to Dubai World loans also fell. Mega Financial closed down 5 percent and First Financial shed 4.7 percent.
Pandora Lee, an analyst with UBS said that the sell-off was sentiment driven. "Taiwan banks actually have very little exposure to Dubai," she said. "But as we saw from the Iceland saga, these are confidence issues, and having just emerged from the last downturn, nobody is thinking onwards and upwards yet."
Tech shares also fell, with top exporters such as Hon Hai and TSMC slipping as investors trimmed risk trades and turned to safe-haven assets such as the Japanese yen.
Jitters over Dubai overshadowed the island's robust third-quarter GDP figures and upward revision of its 2009 and 2010 economic growth forecast.
China's Shanghai Composite Index lost 2.36 percent to end at 3096.2 points on Friday.
The index lost 6.4 percent for the week, its biggest weekly loss in three months as Dubai's debt problems and worries over a possible clamdown on asset prices soured sentiment.
Markets in Singapore and Malaysia were closed for a public holiday.
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