* Stocks driven down by risk-cutting investors
* Dollar drops to fresh 14-year low against yen
* Nikkei at a 4-month low, yen's rise also weighs
* Banking stocks lead decline in the region
By Umesh Desai
HONG KONG, Nov 27 (Reuters) - Asian stocks slumped on
Friday as the Dubai-debt shockwaves hit the region, shaking
banking shares and pushing the yen to a fresh 14-year high
against a struggling dollar as investors unwound risky trades.
The shock Dubai news raised investor fears of debt defaults
that could hit other parts of the global economy just as it is
trying to recovery from the global financial crisis.
Japan's Nikkei average took its cue from a sharp fall in
Europe to hit a four-month low, coming under additional
pressure from weakness in exporters as the dollar fell against
the yen.
The MSCI index of Asia Pacific stocks traded outside Japan
<.MIAPJ0000PUS> dropped 2.5 percent, while the Thomson Reuters
index of regional shares <.TRXFLDAXPU> fell 0.63 percent.
Banking shares led the falls on concerns about exposure to
the billions of dollars in Dubai debt. The MSCI index of
banking shares in Asia Pacific outside Japan <.MIAPJFN00PUS>
shed nearly 3 percent.
"Some of the tensions can spill over into those economies
which are externally dependant for funding their investment
plans," said Binay Chandgothia, chief investment officer at
Principal Global Investors in Hong Kong, a fund.
Dubai said on Wednesday it wanted creditors of state-owned
Dubai World and its property subsidiary Nakheel, to agree to a
debt standstill in a first step towards restructuring.
Dubai World, the conglomerate that spearheaded the
emirate's breakneck growth, had some $59 billion in liabilities
as of August. []
The Dubai announcement sparked immediate rating downgrades
of several government-related entities and sent the cost of
insuring against the emirate's debt soaring and bond prices
tumbling.
European shares had their worst daily percentage loss in
seven months on Thursday and gold climbed to a record high of
$1,194.90. The United States celebrated Thanksgiving holiday.
Chandgothia said some of the Asian falls could reflect
investors locking in profit after a strong rally, which has
lifted the MSCI Asia Pacific ex-Japan index by over 60 percent.
"Even those who came in late into the rally late have made
decent money, so there would be a tendency to take risk off the
table. Probably not a bad time to lock-in gains and let things
settle down before taking the next step," he said.
As investors unwound their exposure to riskier assets, the
yen <JPY=> soared against the dollar to a fresh 14-year high
and also traded stronger against higher-yielding currencies
like the Australian dollar <AUD=>. []
The yen's rise has raised concerns it could hurt export
earnings and push the Japanese economy back into recession. The
Japan Iron and Steel Federation has already raised concerns
with the yen's elevated level against the dollar, saying it
could impact the steel, auto, electronics and shipbuilding
industries. []
On Thursday, exporters like Honda Motor Co <7267.T>
skidded, and Japan's top bank Mitsubishi UFJ Financial Group
<8306.T> slipped as financial shares were hurt by concerns
about their exposure to Dubai's debt. []
The weighed on the Nikkei average, which fell as much as
2.2 percent to 9,180.47, its lowest level since July.
"Similar stories as this Dubai one are likely to continue
to come out, leading risk money to pull out from assets such as
commodities and stocks," said Takahiko Murai, general manager
of equities at Nozomi Securities.
Banking shares in other parts of the region also felt the
brunt of the news -- HSBC <0005.HK>, whose London-traded shares
lost 4.8 percent on Thursday, slumped 5.9 percent and Standard
Chartered <2888.HK>, which fell 6 percent in London, skidded
5.8 percent.
Although Dubai's announcement was Wednesday, Asian markets
were slower to react that those in other regions.
"Although there was talk of it before, there was
uncertainty about the full impact," Andrew Sullivan, a sales
trader with broker MainFirst Securities in Hong Kong, adding
that initially it was seen as a debt restructuring exercise
before the default fears set in.
"Until the details became clear, people were not so worried
about the downside. It is a delayed reaction because more
information became available overnight," he said.
Gold in Asia was hovering just below Thursday's record high
while oil prices stood just below $76 per barrel.
(Additional reporting by Aiko Hayashi in TOKYO; Editing by
Neil Fullick)
((umesh.desai@thomsonreuters.com; +852 2843 6935; Reuters
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