US setback flattens Far East

DEALERS' screens ran blood red in Asia after US shares crumbled overnight on further grim economic data. A slowdown in the US services sector in July stoked fears of a double-dip recession, and sent stocks of Asian exporters and technology stocks slumping in the wake of 3%-plus losses on the Dow Jones, Nasdaq and S&P 500.

Tokyo's Nikkei 225 Average dived more than 2% to below 9500 for the first time since February, edging back up to 9501.02 at the close for a fall of 203.91 on the day. Hong Kong stocks lost nearly 2% as exporters fell. Drops in other markets topped 1.5%.

In Tokyo, the biggest casualties were leading consumer electronics goods makers and chip makers. Sony fell to its lowest since November while Hitachi, NEC, Fujitsu, Sharp, TDK, Sanyo Electric, Advantest and Tokyo Electron all hit 12-month intraday lows.

Shares in Hong Kong's export-dependent enterprises led the Hang Seng index down 161.6 points to 9700.7, and more damage was done as signs of a resurgence in a property price war left major developers down as much as 5%.

HSBC Holdings, the bank group, was a relative outperformer, as it stood steady at HK$85 after its 7% dip in first-half earnings confounded pessimists who had been expecting a much grimmer picture. Local subsidiary Hang Seng Bank was the only riser in the index after reporting a modest 3% decline in profits, and the shares put on 60 cents to HK$84.25. The HSBC results showed well against local rivals that have reported profit falls of between 22% and 37% as bad debts cut earnings. HSBC's global bad-debt provisions were lighter than expected and its default on its Hong Kong credit-card business was well below local averages.

Losses on loans are hitting banks in Singapore, and shares of OCBC Bank, the country's fourth largest lender, tumbled 4% after first-half profits crashed 30%. As other local lenders dived in sympathy and key technology stocks swooned on the Nasdaq fall, the Straits Times index fell 34 points to 1448.3.

In South Korea, bank stocks saved the market from a bigger drubbing after the central bank left interest rates unchanged and foresaw gross domestic product growth this year of 6%. Rises of 2% among top banks helped offset falls among technology stocks but the Kospi index lost 9.4 points at 666.36.

Government attempts in Taiwan to stem the tide of falling prices by mobilising State funds had little success as tech stocks joined the regional rout. The Weighted Average plumbed new eight-month lows with a fall of 63.08 points to 4573.59.

The threat of slowing demand for iron ore, copper and other raw materials hammered resource stocks in Sydney, but the All Ordinaries closed up 0.6 at 2961.1. Miner BHP Billiton tumbled nearly 4% as copper prices weakened. Insurance giant AMP, which owns Pearl Assurance in Britain, lost a further 4% after last week's credit risk downgrade.

Indonesian stocks fell more than 2%, leaving the Jakarta Composite index down 10.12 points at 439.76. But Thailand's SET index held relatively steady at 362.06, down 0.8, and Malaysia's Composite index dropped just 4.11 points to 717.04.