Bruised Asian markets struggle to find a floor

TOKYO (AFP) - Credit fears unleashed fresh turbulence on Asian stock markets Friday as Tokyo spiralled lower and other bourses in the region struggled to find a floor a day after one of the worst routs in recent years.

A late recovery overnight on Wall Street helped shares to open higher in Sydney, Hong Kong and Manila, while Seoul and Singapore saw much more modest losses than the previous day's carnage sparked by US mortgage worries.

But much of the gains soon faded with confidence still at a low ebb after Thursday's slump that saw some Asian bourses fall by over five percent.

Tokyo, Asia's largest market, came under heavy selling pressure with the Nikkei-225 down 2.33 percent by lunch as a resurgent yen forced investors to take a more cautious view of the earning prospects of major exporters.

And Hong Kong quickly reversed course to slip 1.5 percent into the red.

Elsewhere investors were taking a welcome breather after Thursday's severe selloff, but it was unclear how long the respite would last given concerns that the US mortgage problems could spark a full-blown credit crunch.

"It's looking a fair bit healthier than it has for a while. I guess the late rebound in the US has reassured people a bit," said Eric Betts, an equity strategist at Nomura Securities in Sydney where stocks opened up 0.8 percent.

But he said it was too soon to say the worst of the subprime problems were over.

"It's hard to believe that all the skeletons are out of the closet. Some of these (firms' problems) will only come to light if their lenders pull the plug on them or force them to come clean," he added.

Elsewhere in the region, Taipei gained 0.68 percent, Singapore firmed 0.7 percent, Shanghai added 0.83 percent and Kuala Lumpur picked up 0.8 percent in early deals.

Seoul dipped 0.3 percent after plunging nearly seven percent Thursday -- its biggest ever one-day point decline.

"The market trimmed much of its earlier losses but it is too early to say that the bout of correction is completely wrapped up," said Woori Investment & Securities analyst Kang Hyun-Cheol in Seoul.

The Australian and Japanese central banks injected extra liquidity into the banking system again Friday to try to calm markets but the focus of investors remained on events overseas.

Overnight on Wall Street the Dow Jones index ended lower for a sixth straight day, but pared back steep losses to end down 0.12 percent as the market tried to find a bottom.

The stock gauge had pitched to a more than 10 percent loss from its record intra-day trading peak of 14,021.95 on July 17 after American investors received a double dose of bad news tied to the housing market.

The US government reported that new home construction dived to a 10-year low in July, and Countrywide Financial -- America's leading mortgage lender -- said it had tapped an 11.5-billion-dollar credit line to boost its finances.

European stock markets took another dive Thursday, led by London where the FTSE 100 index of leading shares closed down 4.10 percent, its biggest fall since March 12, 2003, shortly before the outbreak of the Iraq war.

Emerging markets also felt the pain.

Brazil's stock market plunged nearly nine percent Thursday before recovering for a 2.5 percent loss as worries over US housing debt woes spilled through Latin America's bourses for yet another day.