Asian Stocks Slump as Dollar Tumbles, Subprime Losses Widen

Asian stocks fell to a two-week low on concern a weaker dollar will erode the value of sales to the region's biggest export market and after U.S. financial companies announced more subprime mortgage-related losses.

Sony Corp., which got 29 percent of its 2006 sales from the U.S., led declines by exporters. Australia's Westpac Banking Corp. paced a drop among lenders.

We'll start to see the U.S. slow down from here on out, said Taku Yamamoto, who helps oversee about $107 billion at the Pension Fund Association in Tokyo. People have been betting on emerging markets as a way of insulating their investments from the U.S. fallout, but don't forget that these markets are dependent on the U.S. as well, so they too will be affected.

The Morgan Stanley Capital International Asia-Pacific Index slumped 1.9 percent to 164.09 as of 10:20 a.m. in Tokyo, headed for the lowest close since Oct. 22. The Nikkei 225 Stock Average lost 2.1 percent in Japan, where the government today reported a bigger-than-expected drop in machinery orders. All markets open for trading declined.

The Standard & Poor's 500 Index fell 2.9 percent in the U.S. yesterday, the most since Aug. 9. American International Group Inc., the largest U.S. insurer, said third-quarter profit decreased and General Motors Corp., the world's biggest automaker, announced a record $39 billion quarterly loss. Morgan Stanley, the second-biggest U.S. securities firm, said its subprime-related assets have lost $3.7 billion of their value.

Separately, the dollar slid against currencies in Japan, South Korea and Australia. It was recently trading at 112.38 yen, the lowest since Aug. 17. A weaker dollar reduces the value of Asian exporters' dollar-denominated sales in local-currency terms.

Japan's Sony fell 2.9 percent to 5,360 yen. Samsung Electronics Co., South Korea's largest exporter, lost 3.7 percent to 549,000 won. Toyota Motor Corp., the world's largest automaker by value, slid 3.4 percent to 6,220 yen.

Westpac, Australia's third-largest lender, slumped 3.4 percent to A$28.85. Mitsubishi UFJ Financial Group Inc., Japan's biggest bank, slid 3.4 percent to 964 yen. Mizuho Financial Group Inc., the country's second largest, declined 3.1 percent to 565,000 yen.

The weakening U.S. currency is sparking concern investors will flee dollar assets, and that is bad news for stocks here as well, said Juichi Wako, a strategist at Nomura Securities Co. in Tokyo. The U.S. has to deal with the competing problems of the weak dollar and subprime loans.

Nasdaq 100 futures slid 1.2 percent in after-hours trading in Chicago after Cisco Systems Inc., the world's biggest maker of network equipment, reported profit that disappointed some investors, sending the company's shares down 9.3 percent in extended trading.

Source - Bloomberg