Asian stocks tumble again as US economic troubles mount

HONG KONG (AFP) - Frustrated investors resumed their sell-off on Asian stock markets Monday after poor US jobs data and growing fears over the US housing market knocked more than two percent off Wall Street.

Dealers said players were left with few options but to sell, extending the rout on global bourses which gathered steam late last month amid concerns the US mortgage industry is in real trouble.

Those worries reared again last Friday when mortgage lender, American Home Mortgage, announced it was not accepting new business and Standard & Poor's ratings agency downgraded its outlook for investment bank Bear Stearns.

Bear Stearns has been at the centre of troubles linked to the fraught US sub-prime mortgage market, or home loans made to risky borrowers, with two hedge funds losing up to 1.6 billion dollars.

A US Labor Department report which revealed job growth of 92,000 in July added to the negative tone after economists anticipated gains of 135,000.

"If the Dow falls some more, Asian markets, including Hong Kong, will likely see more selling pressure in the short term," said Castor Pang, a strategist at Sun Hung Kai Financial Group in Hong Kong.

"In the face of prospects of more volatility on Wall Street, investors are cautious on what could come out of the Fed meeting this week," he said.

The US Federal Reserve will meet Tuesday and is widely expected to keep interest rates on hold at 5.25 percent, where it has sat for 13 months.

All eyes will be on what the Fed has to say about the US home loan problem and how that may affect the wider economy, with the markets already pricing in one if not two rate cuts by the end of the year.

On Wall Street's lead, the region saw a sharp early sell-off.
Sydney was down 1.7 percent, Taipei shed 1.28 percent, Seoul was off 1.2 percent, Wellington lost 1.16 percent and Manila was among the worst on the day with a 2.8 percent tumble.

Losses were held to a more modest 0.39 percent in Tokyo where solid results by Toyota Motor provide some respite.

"Market players are focusing on signs of whether the sub-prime loan problems will slow the global economy," said Kazuhiro Takahashi, an equities manager at Daiwa Securities SMBC in Japan.

"If the impact is limited to the US economy, the selling pressure on the stock market is likely to fade," he said.

However, in Hong Kong -- down 2.28 percent in late trade -- Pang said he doubted if solid first-half earnings by blue chips and major Chinese companies could prevent the market from falling further.

"Some hedge funds also continued to trim their Hong Kong portfolios for fear of redemptions from their clients and their move exerted additional selling pressure on the local market," he added.

In late trade, Singapore had plunged 3.40 percent, Kuala Lumpur was down 2.86 percent, Jakarta slumped 3.94 percent, Bangkok was off 2.31 percent and Mumbai had lost 1.81 percent.

On the day, China continued to buck the trend, chalking up another record finish with a gain of 1.48 percent on the Shanghai Composite Index as investors there continued to march to their tune.

Despite the regional falls, Kim Young-Tae a KTB Asset Management fund manager in Seoul, remained optimistic the US could avoid a much feared credit crunch stemming from the crisis in US sub-prime mortgage industry.

"The US credit market troubles continue to stir up global financial markets but I believe the troubles will be well contained, doing little harm to the fundamentals of the US economy," he said.