Asia damped by US economic outlook

By Andrew Wood in Hong Kong 2 hours, 20 minutes ago

Asian shares were broadly lower on Thursday as worries deepened about the state of the US economy and its effects on global growth after home prices fell in a third of US cities. The Morgan Stanley Capital International index of Asia Pacific shares outside of Japan dropped 0.1 per cent, following Wednesday's loss of 3.4 per cent.

The National Association of Realtors said home prices declined in one third of US metropolitan areas last quarter, fuelling concerns that consumer spending may slow in Asia's biggest export market.

In Japan, the Nikkei 225 average drooped as much as 0.4 per cent as the yen held at 2-year highs against the dollar. But by early afternoon in Tokyo it had recouped its losses and was up 0.2 per cent at 14,869.34 as some investors looked for bargains.

The broader Topix index fell by 0.3 per cent in the morning, teetering on the edge of becoming a bear market by one definition as it has fallen by 20 per cent from its peak in February. But it too recovered, trading 0.3 per cent higher in the afternoon at 1,443.63.

As shares fell, Japanese investors shifted money to safer government debt and government bond futures rose to a 22-month high.

In the early afternoon in Tokyo, the yen was around Y108.45 versus the dollar. The euro hit a fresh record high against the dollar at $1.4871.

Australian shares fell for the third day in a row. Lower prices for base metals depressed mining companies and persistent worries about losses from the credit squeeze dragged down the financial sector. By early afternoon in Sydney the S&P/ASX 200 index was above the day's lows but still down 0.8 per cent at 6,330.90. National Australia Bank (NYSE:NAU) fell 2 per cent to A$40.44 and ANZ Bank lost 0.8 per cent to A$27.61.

Rams Home Loans, one of the Australian companies worst affected by the US credit squeeze in August when it could not roll over A$6.17 billion of debt, dropped as much as 22 per cent. Investors worried the mortgage lender might not be able to refinance some of its debt. Rams shares were down 18 per cent at A$0.21 by early afternoon, compared with their flotation price of A$2.50 in July.

Philippine shares dropped, tracking other markets. By early afternoon in Manila, the Philippine Stock Exchange index was 1.2 per cent lower at 3,459.61. The geothermal company PNOC-Energy Development was up 9.5 per cent at Pesos6.90, after rising as much as 15 per cent, as bids for the government's remaining 60 per cent stake in the company closed. Officials said Philippine power producer First Gen's joint venture with Iceland's Reykjavik Energy Invest offered the highest bid, of $1.35bn.

Hong Kong's Hang Seng index managed to end the morning up 0.4 per cent at 26,727.28, but mainland Chinese shares were sharply lower. The Shanghai Composite index was down 2 per cent at 5,108.12 and Shenzhen was 2.1 per cent lower at 1,286.24.

Shares of Value Partners Group, the first asset manager to sell shares in Hong Kong, were down 3 per cent in their market debut after a $373 million initial public offering.

Elsewhere, Korea's Kospi was down 0.6 per cent, while Taiwan shares were off 0.1 per cent. Singapore's STI was up 0.1 per cent.