Asian markets fall as jitters about banks persist

[April 22, 2009]  HONG KONG (AP) -- Most Asian markets faltered again Wednesday, with China and Hong Kong shares tumbling almost 3 percent, as positive comments from the U.S. Treasury chief failed to reassure many investors about the health of the financial system. European stocks were slightly higher.

Losses across much of Asia added to the toll from Tuesday's sharp drop. A number of banks got hit even though their Western peers rebounded overnight, while technology shares outperformed. The dollar, euro and oil prices traded lower.

The lackluster performance by some banks reflected trepidation among many investors that financial institutions are facing more pain in the form of huge losses on loans linked to consumers and businesses expected to default as the economy worsens.

U.S. Treasury Secretary Timothy Geithner's assertion that the "vast majority" of banks could be considered well-capitalized came as a relief to many U.S. investors and help Wall Street close higher.

But many traders remained leery ahead of the release of results from the U.S. government's "stress tests" of bank balance sheets. Meanwhile, the International Monetary Fund said U.S. financial firms could suffer $2.7 trillion in losses through 2010 -- nearly double its projection just six months ago -- and the worldwide total could surpass $4 trillion.

Still, Khiem Do, a Hong Kong-based fund manager at Baring Asset Management, said markets would likely fluctuate in a narrow range in the coming weeks so long as investors believe policymakers are prepared to intervene in the financial industry.

"Obviously troubles in the banking system are not totally resolved. There will still be more write-offs and other problems," said Do, who helps oversee about $7 billion of Asian equities. "But if investors know that governments are handling the problems rather than ignoring them they will have more confidence."

In European trade, stock measures in Britain, Germany and France edged up by about 0.2 percent each. U.S. stock futures pointed to a weak open on Wall Street. Dow futures fell 43 points, or 0.5 percent, to 7,880 and S&P 500 futures lost 6.7, or 0.8 percent, to 841.

Earlier in Asia, Tokyo's Nikkei 225 stock average rose 15.97 points, or 0.2 percent, to 8,727.30, while South Korea's Kospi added 1.4 percent to 1,356.02.

But most other markets fared worse. Hong Kong's Hang Seng lost 407.44 points, or 2.7 percent, to 14,878.45, while Shanghai's benchmark fell 74.48 points, or 2.9 percent, to 2,461.35 -- its sharpest one-day drop in two weeks. Shares in Chinese firms were hurt by unease about rapid growth in lending by China's banks and an easing of optimism about an economic revival, analysts said.

India's Sensex traded down 1.1 percent and Australia's market fell 0.3 percent. Taiwan's benchmark was little changed.

Investors targeted banks in China and Japan. Mitsubishi UFJ Financial Group, Japan's largest bank, fell 2.4 percent. China Construction Bank retreated nearly 6 percent in Hong Kong.

It was a better day for tech shares, with Pioneer Corp. and chipmaker Elpida Memory surging in Tokyo on speculation that the government may invest in the two companies under a recapitalization program for struggling non-financial firms. There were also reports Elpida may hike prices for chips.

Pioneer soared more than 17 percent, while Elpida jumped almost 15 percent. Giant South Korean chipmaker Hynix jumped over 13 percent.

Overnight on Wall Street, the Dow rose 127.83, or 1.6 percent, to 7,969.56.

Broader stock indicators showed the biggest gains. The Standard & Poor's 500 index rose 17.69, or 2.1 percent, to 850.08, and the Nasdaq composite index rose 35.64, or 2.2 percent, to 1,643.85.

Oil prices were lower hovered near $49 as traders worried that a weekly U.S. crude inventories report will show demand remains weak amid a severe recession.

Benchmark crude for June delivery rose 11 cents to $48.66. The contract Tuesday gained 4 cents to settle at $48.55 a barrel.

In currencies, the dollar weakened to 98.25 yen from 98.55 yen. The euro was lower at $1.2926.

Associated Press Writer Tomoko A. Hosaka in Tokyo contributed to this story.

[Associated Press; By JEREMIAH MARQUEZ]

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