Asian stocks fall again on US subprime woes

GLOBAL MARKETS

European and Asian stocks dropped after Bear Stearns stopped investors from pulling money out of a hedge fund and Macquarie Bank said two of its funds may post losses as the US subprime-market rout spreads.

The yen rose to the highest in 12 weeks against the dollar, climbing to 117.86 from 118.61. It topped 118 for the first time since April 19. The yield on the benchmark US 10-year note fell 4 basis points to 4.69 per cent, according to bond broker Cantor Fitzgerald.

All Asian markets dropped except Vietnam. Japan's Topix Index lost 2.2 per cent. South Korea's Kospi plunged 4.8 per cent, the most since May 17, 2004. The MSCI Emerging Markets Index, which includes Russian, Chinese and Brazilian equities, lost 3.2 per cent. US stocks tumbled yesterday after American Home Mortgage Investment, which caters to homeowners with more reliable payment records, said it lacks cash to fund new loans.

Bear Stearns, manager of two hedge funds that collapsed last month, said after US markets closed that it halted redemptions from a third fund as losses in the credit markets expand beyond securities related to subprime mortgages. The Bear Stearns Asset-Backed Securities Fund had less than 0.5 per cent of its $900 million of assets in securities linked to subprime loans, spokesman Russell Sherman said in an interview yesterday. Even so, investors concerned about losses sought to withdraw their money, he said.

Europe

Royal Bank of Scotland Group and ING Groep led shares of financial companies lower in Europe, while Mizuho Financial Group slid in Japan. Macquarie, Australia's largest securities firm, tumbled the most in five years.

The Morgan Stanley Capital International World Index, a global benchmark, fell 1 per cent to 1,550.52 in London with all 10 industry groups declining. Futures on the Standard & Poor's 500 Index declined 0.9 per cent. The dollar also retreated, while Treasury notes gained. The risk of owning European corporate bonds soared.

"No one knows where the ultimate subprime risk resides so investors across the globe are ducking for cover,'' said Simon Carter, head of North American equities at Aegon Asset Management in Edinburgh, where he helps oversee $3 billion. "Incremental news of hedge funds and subprime issuers shutting their doors will likely continue.''

Concern that defaults among subprime mortgages may be spilling over to other credit markets and hurt earnings and takeovers is forcing investors to reappraise the risk of owning equities. The MSCI World has dropped 5.7 per cent since its 2007 high on July 19, erasing $2 trillion worth of its companies' market value.

National benchmarks fell in all 16 western European markets that were open today. The UK's FTSE 100 retreated 2 per cent, while France's CAC 40 slid 2.3 per cent. Germany's DAX slipped 2.1 per cent.

Contracts on 10 million euros ($13.8 million) of debt included in the iTraxx Crossover Series 7 Index of 50 European companies increased 59,000 euros to 459,000 euros today, according to JPMorgan Chase.

A rise in the cost of the five-year contracts signals worsening perceptions of credit quality.

The Chicago Board Options Exchange Volatility Index, derived from the prices paid for options on the Standard & Poor's 500 Index, yesterday finished less than 1 point, or 2.7 percent, short of its highest since April 2003, a level reached on July 27.

Royal Bank, Britain's second-largest bank, decreased 5.2 per cent to 562 pence. ING, the biggest Dutch financial-services company, retreated 2.8 per cent to 30.45 euros.

Deutsche Bank fell 2.7 percent to 98.20 euros even after Germany's biggest bank said second-quarter profit rose 31 per cent, beating analysts' estimates, on record trading revenue. HBOS, Britain's biggest mortgage bank, slumped 4.2 per cent to 928.5 pence even as first-half profit climbed 20 per cent.

Man Group, the world's largest publicly traded hedge fund company, retreated 5 per cent to 539.5 pence. The company said yesterday after UK markets closed that its AHL Diversified Futures fund fell 6.8 per cent in the week ended July 30.

Cadbury Schweppes declined 7.3 per cent to 575 pence. The world's largest confectionery maker said first-half net income and sales missed analysts' estimates and margins are unlikely to improve this year.

S&P 500 futures expiring in September lost 13.10 to 1,448.80. Dow Jones Industrial Average futures fell 102 to 13,173. Nasdaq-100 Index futures decreased 12.75 to 1,933.