* Investors wary as Korean tensions mount
* Markets choppy in thin year-end trading
* Euro pressured, no solution for European debt crisis
(Updates prices)
By Ian Chua
SYDNEY, Dec 20 (Reuters) - Asian shares fell to their
lowest in over a week on Monday, led by a 2 percent slide in
Shanghai stocks as thin year-end trading made for exaggerated
moves, not helped by mounting tensions on the Korean peninsula.
The euro slipped to a two-week low after last
week's massive five-notch credit rating downgrade of Ireland
by Moody's and euro zone leaders failed to reassure markets on
how they will tackle the debt crisis in the short term.
With the year-end holidays looming, buyers were hard to be
found, having taken profits since Asian stocks hit 2-1/2 year
highs last week.
Asia Pacific stocks, as measured by MSCI
fell 0.5 percent, having earlier dropped to lows not seen
since Dec. 8, while the index excluding Japan
shed 0.8 percent.
Despite threats of war by Pyongyang, South Korea on Monday
launched live firing drills on a disputed island after an
emergency U.N. Security Council meeting failed to agree on how
to defuse the crisis.
Share markets from Australia to Singapore were all in the
red with Japan's Nikkei down 0.8 percent, Hong Kong's
Hang Seng index down 1.0 percent and South Korea's KOSPI
0.7 percent lower. Shanghai's stock index fell
1.8 percent, having earlier slid about 3 percent.
"We see a typical year-end money crunch plus jitters over
continued PBOC tightening and consequently a lacklustre market
performance until early next year," said Shanghai Securities
senior trader Zheng Weigang.
Technically, the fall in the Shanghai Composite Index to
below its 250-day moving average indicates the market may
struggle in the near term.
Even major miners like BHP Billiton erased gains
to close lower on the day as support from higher commodity
prices faded.
Copper , which came within a whisker of the record
high on the London Metal Exchange, was last up 0.9 percent at
$9,145 a tonne. Earlier, it rose as high as $9,257.50, not far
off the record high of $9,267.50 set last week.
U.S. crude <CLc1> was flat near $88 a barrel.
Analysts generally expect strong growth in emerging
economies to keep commodities in demand next year. JPMorgan
forecasts a 17 percent return for the S&P commodities index,
or the GSCI , over the next 12 months.
Despite the negative start to the week, MSCI's Asia
Pacific stock index is still up some 10 percent so far this
year, compared with a rise of around 8 percent for the MSCI
world equity index .
JPMorgan predicts emerging markets equities will provide
some of the best returns next year among global stocks. It
forecasts the MSCI emerging markets stock index will rise to
1,500 in 2011 from around 1,108 currently .
EURO SAGS
The euro plumbed a two-week low at $1.3125 was looked set
to test support at $1.3100-3090 , while the dollar edged
up 0.1 percent versus a basket of major currencies.
"The dollar is generally supported this morning by
tensions in the Korean peninsula and concerns over European
debt problems," said Tsutomu Soma, senior manager at Okasan
Securities.
"The euro has been under pressure, especially since the
downgrading of Ireland last week. ... Selling pressure could
increase should the euro break $1.3."
The dollar's upside was capped, however, as U.S. Treasury
yields retreated from recent highs. The 10-year bond yield
fell 2.7 basis points on the day to 3.311 percent,
off the seven-month peak of 3.568 percent set last week.
Some investors and analysts have taken a view the market
was pricing in too much economic improvement too fast,
prompting yields to ease back.
(Additional reporting by Lu Jianxin in Shanghai and Chikafumi
Hodo and Hideyuki Sano in Tokyo; editing by Kazunori Takada)
