* Most Asian stocks fall, but Hong Kong recovers 6 pct, led
by HSBC
* Yen firms vs euro despite G7 threat of intervention
* Emerging markets at risk of capital flow drought
(Repeats to more subscribers)
By Kevin Plumberg
HONG KONG, Oct 28 (Reuters) - Asian stocks fell for a fifth
straight day on Tuesday as investors pulled money out of the
region in anticipation of a deep global slowdown, while
Japanese bank shares tumbled on expectations of sharp market
losses.
Large financial institutions such as Mitsubishi UFJ
Financial Group <8306.T>, Japan's biggest lender, saw their
stocks fall 10-16 percent for a second day as investors focused
on the investment portfolios of Japanese banks that have likely
deteriorated as the Nikkei share average hit a 26-year low.
The U.S. dollar climbed to a 2-1/2-year high against the
euro, benefiting as institutions and investors unravel overseas
trades financed by borrowing in dollars.
The result has been a scramble for the U.S. currency and a
broad decline in almost every asset class outside of government
bonds in the euro zone, Japan and the United States.
The yen strengthened against the euro, a day after the
Group of Seven rich nations issued an unusual brief statement
singling out the yen, warning that high volatility in the
currency could be detrimental to stability.
"Confidence is certainly lacking. It hasn't been restored
by anything anyone's done of late," said Hans Kunnen, head of
investment markets research at fund manager Colonial First
State in Australia.
The Nikkei index <> was down 0.95 percent to its
lowest since 1982. Canon Inc <7751.T> shares were down 4.6
percent after the copier and camera maker cut its annual
outlook because of slower overseas demand and the strong yen.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> slipped 0.5 percent after earlier hitting a
4-year low. The index is down 62.5 percent so far this year,
exceeding the 49.7 percent decline in the all-country world
index <.MIWD00000PUS>.
Hong Kong's Hang Seng index <> stood out among the
ruins, bouncing 6.5 percent after plummeting more than 12
percent on Monday in its biggest single-day decline since 1997.
Shares of global lender HSBC <0005.HK> jumped 10 percent,
leading the rebound in crippled shares.
South Korea's benchmark KOSPI rallied a modest 0.4 percent,
led by high-tech exporters like Samsung Electronics
<005930.KS>. The Korean central bank's biggest ever rate cut on
Monday as well as a host of measures to bolster markets have
had limited success in boosting sentiment on equities.
Investors remained extremely wary of countries running
current account deficits and, in Korea's case, with a
significant amount of foreign debt that is vulnerable to a
freeze in funding.
They also have been pulling out of emerging markets en
masse, exacerbating the collapse in economies such as Iceland
and Hungary that have had to seek emergency loans from the
International Monetary Fund.
Stephen Jen, global head of currency research with Morgan
Stanley in London, has grown increasingly pessimistic about
emerging markets.
He said in a note that capital flows to emerging markets
could fall to as low as $300 billion from $750 billion averaged
over the last two years if global economic growth slowed to 1
percent.
"Opinions will quickly shift from 'this is unfair as
emerging markets have solid fundamentals' or 'emerging market
assets have already fallen too much for investors who haven't
sold to sell now', to 'could the emerging markets story have
been exaggerated all along?'" he said.
The U.S. dollar edged up 0.3 percent from late U.S. trade
to 93.07 <JPY=>. Ihe U.S. currency was still not far away from
a 13-year trough of 90.87 yen struck on trading platform EBS on
Friday.
The euro dropped 1 percent to $1.2370 <EUR=> after falling
as low as $1.2329 on EBS. The euro slid 0.7 percent to 115.10
yen <EURJPY=R>. The euro struck a 6-1/2-year low of 113.62 on
EBS the previous day.
Japanese government bonds slipped following a retreat in
U.S. Treasuries the previous day, while an unstable Tokyo
equity market and concern over a 20-year bond auction also
weighed on prices.
December 10-year JGB futures dipped 0.23 point to 137.92
<2JGBv1>. The benchmark 10-year yield climbed 3 basis points to
1.505 percent <JP10YTN=JBTC>.
Central banks around the world have been trying to ease
borrowing costs to lessen the blow of a sharp slowdown.
The Federal Reserve is widely expected to deliver a 50
basis points rate cut on Wednesday. Some high-profile
investors, such as BlackRock's Bob Doll, believe the Fed's
target rate may need to go to zero percent to shore up the
economy.
Oil prices <CLc1> fell for a third day, down 90 cents to
$62.33 a barrel, near a 17-month low. Crude has dropped a
stunning $85 since hitting a record high in July as slowing
demand from big consumers like China and the United States is
factored in.
