(Repeats to wider audience, with no changes to text)
* MSCI pan-Asia index at lowest since July 2006
* Japan's Nikkei, down 2.65 pct, leads region lower
* Metals weaken, but U.S. dollar rally pauses
By Kevin Plumberg
HONG KONG, Aug 19 (Reuters) - Asian stocks fell to a
two-year low on Tuesday, led by exporter shares, on fears the
U.S. government will have to bail out the top mortgage finance
companies, further destabilising the financial sector.
Wall Street tumbled and shares of Fannie Mae <FNM.N> and
Freddie Mac <FRE.N> fell to the lowest in nearly 20 years after
an article in Barron's said a government bailout could wipe out
existing holders of the two companies' common stock with other
asset holders also suffering losses. []
The news seemingly put the bottom in the worst housing
crisis since the Great Depression further out of reach, and
confounded those expecting a U.S. recovery, at a time when the
euro zone and Japanese economies are shrinking and could be
lumbering toward recession.
Worries about the global economy bolstered government bond
prices, while the dollar was largely steady -- taking a break
from its sharp gains over the past two weeks.
"There's a bit of a down draft from what happened in the
U.S. overnight and commodities are a bit weak, too," said
Michael Heffernan, a strategist and senior client adviser at
Austock Securities in Sydney.
Japan's Nikkei share average <> tumbled 2.65 percent
to a one-month low. Shares of index heavyweights Fast Retailing
Co Ltd <9983.T>, a clothing retailer, and Canon Inc <7751.T>
were among the biggest drags.
The MSCI pan-Asia equities index <.MIAS00000PUS> fell 1.7
percent to its lowest since July 2006, down 22 percent this
year, while the MSCI's Asia-Pacific ex-Japan index
<.MIAPJ0000PUS> fell for a third straight session to a 17-month
low.
South Korea's KOSPI <> fell 2.15 percent, led down by
consumer technology giant Samsung Electronics Co Ltd
<005930.KS> and the world's fourth-largest steelmaker POSCO
<005490.KS>.
Hong Kong's Hang Seng index <> declined 1 percent, led
by property firms ahead of earnings due in the next few weeks.
"The Chinese stock market's steep losses since the Olympics
(began) are also denting sentiment towards heavy industry such
as steel makers and shipbuilders. There are worries the Chinese
economy may not grow as robustly after the Olympics," said Won
Jong-hyuck, a market analyst at SK Securities in Seoul.
Japanese government bonds climbed as equity markets
declined, boosted by gains in U.S. Treasuries.
Bonds continued to draw support from worries about domestic
and global economies, underscoring the prevailing view that the
Bank of Japan will keep interest rates steady.
Japan's central bank is expected to downgrade its view on
the economy and keep rates on hold at 0.5 percent at a policy
meeting expected to end between 0300 and 0430 GMT.
September 10-year futures <2JGBv1> rose 0.13 point to
137.97, approaching a four-month high of 138.12 hit last week.
The benchmark 10-year yield <JP10YTN=JBTC> fell 1 basis point
(bp) to 1.430 percent.
U.S. Treasuries extended an overnight rally, with the
10-year note yield <US10YT=RR> down 14 bps since the month
began.
A further decline in gold and oil prices pounded metals as
investors continued to liquidate their positions in
anticipation of an easing in demand for raw materials.
Spot platinum prices <XPT=> dropped 5 percent to the lowest
since mid-September, and gold <XAU=> shed 1 percent to around
$790 an ounce, but held just above a 9-month low hit on Friday,
having dropped more than $180 since mid-July when crude peaked.
Crude <CLc1> slipped 38 cents to $112.49 a barrel on
expectations that Tropical Storm Fay would bypass key assets in
the Gulf of Mexico. Still, the continued presence of Russian
troops in Georgia, in defiance of international pressure to
withdraw, kept a floor under oil prices.
Despite the continued pressure on commodity prices, the
U.S. dollar barely budged against the euro, taking a break from
its sharp two-week rise as investors awaited the latest ZEW
survey of German investor sentiment due later.
The euro was largely unchanged at around $1.4690 <EUR=>,
near a six-month trough hit on the EBS electronic trading
platform on Monday.
Against the yen, the dollar was down 0.3 percent at 109.82
yen <JPY=>, slipping from last week's 7-month high above
110.50.
