Battered Asian stock markets tumble again

TOKYO (AFP) - Bruised Asian stock markets suffered another drubbing on Friday, spiralling ever lower as panicky investors continued to dump shares with no end in sight to the recent turmoil on global markets.

An early rally on some markets quickly fizzled out as Tokyo set the region up for another nasty fall, with Japanese shares briefly down over four percent by early afternoon as a stronger yen pummelled exporters.

Investors fled "the crashing stock markets and headed to the safer bond market," said Akihiko Inoue, a strategist at Mizuho Investors Securities.

Hong Kong slumped 3.30 percent, sliding below the key 20,000 points level, while Singapore tumbled 3.4 percent as investors fretted that problems rippling out of the US mortgage sector could spark a full-blown credit crunch.

"It's hard to believe that all the skeletons are out of the closet," said Eric Betts, an equity strategist at Nomura Securities in Sydney.

"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.

For Asian markets the main worry is that foreign investment funds will be forced to further offload shares to cover losses in securities backed by US subprime mortgages to risky borrowers, or to stash funds in more stable bonds.

Overnight on Wall Street, US shares fell deep into the red again before recovering much of the losses to close slightly lower after another extremely volatile day, while the London market tumbled by over four percent.

In Tokyo a stronger yen dimmed prospects for Japanese exporters' future earnings, while uncertainty about whether the Bank of Japan will raise interest rates next week kept investors on edge.

An unravelling of risky "carry trades" that have allowed investors to binge on cheap Japanese credit to invest in fast-growing Asian stock markets appeared to be taking a heavy toll around the region.

The yen shot higher against other major currencies as players scrambled to unwind risky positions and send funds back to Japan.

Around the region markets were buckling again under heavy selling.

Singapore lost 3.44 percent, Mumbai was down 1.63 percent, Shanghai slipped 0.71 percent, Bangkok declined 1.03 percent while
Kuala Lumpur fell 2.5 percent and Manila ended two percent lower.

Seoul dipped 0.3 percent after plunging nearly seven percent Thursday -- its biggest ever one-day point decline. Sydney dipped 0.6 percent.

"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.