(Repeats to more readers in Asia)
(Updates prices after report on Lehman Brothers, adds Hong
Kong stock market)
By Jason Subler
SINGAPORE, June 3 (Reuters) - Asian stocks fell on Tuesday,
led by financial firms and exporters, as renewed worries about
further damage from the global credit crunch prompted investors
to seek shelter in safer assets such as government bonds.
Shares extended early losses after the Wall Street Journal
reported that Lehman Brothers <LEH.N> may raise another $3-4
billion in fresh capital, suggesting it could post its first
quarterly loss since going public.
That report added to credit worries triggered by a spate of
negative news overnight, including ratings agency Standard &
Poor's downgrading the debt ratings of three major U.S.
investment banks, sparking selling in the dollar, weighing on
Asian stocks and boosting demand for safe-haven government
bonds.
"The market is very cautious about developments with
troubled financial firms," said Hideaki Inoue, chief manager of
forex trading at Mitsubishi UFJTrust Bank in Tokyo.
"But market players are psychologically better prepared for
bad news compared to what it was like in March when dollar/yen
tumbled as if in a free-fall below 100."
The dollar slipped to 104.38 yen <JPY=> after the news,
little changed on the day and off a day's high of 104.71 yen
hit before the report. September Treasury futures <TYv1> edged
up 4.5/32 to 113-14/32, bouncing back from an early dip.
That extended the Japanese yen's gains from Monday, when it
saw its biggest daily gain against the dollar in nine weeks as
investors unwound yen carry trades, in which the low-yielding
currency is used to buy riskier assets elsewhere.
Asian shares extended their losses following the Lehman
report, with the MSCI index of shares in the Asia-Pacific
region outside Japan <.MIAPJ0000PUS> down 1.8 percent by 0708
GMT, compared with a 0.4 percent drop mid-morning, putting it
course to end a three-day run of gains.
A pan-Asian index <.MIAS00000PUS> was down 1.6 percent.
Japan's Nikkei share average <> fell 2 percent, after
spending the morning down around 1.5 percent, with exporters
such as Honda Motor Co Ltd <7267.T> leading the decline on
concerns that a stronger yen would dash overseas demand for
Japanese goods.
Financial shares such as top Japanese lender Mitsubishi UFJ
Financial Group <8306.T> also fell on the renewed worries over
the prospects of the financial sector.
FLIGHT TO QUALITY
Hong Kong shares <> extended losses to fall 2.2
percent, weighed by the Lehman report and hefty losses in
Chinese telecoms stocks, as investors locked in gains in the
run-up to a recent announcement of an industry reshuffle.
Seoul also weakened, with the Korea Composite Stock Price
Index <> down 1.7 percent. Taiwan's TAIEX index <>
was down 1.5 percent, hit by falls in technology companies such
as TSMC <2330.TW>, which rely heavily on exports.
Australian shares also fell, with the benchmark S&P/ASX 200
index <> down 1.6 percent, led by declines in financial
firms such as Macquarie Group <MQG.AX> and big banks.
The Reserve Bank of Australia left interest rates unchanged
on Tuesday, sending the Australian dollar down to to
$0.9541/45, down from around $0.9573 before the rate decision.
The renewed warnings that the credit crisis sparked by
defaults in U.S. subprime mortgages is not yet over gave broad
support to assets that are seen as less risky, even though high
inflation is prodding investors to seek higher yields.
The benchmark 10-year yield on Japanese government bonds,
which moves in the opposite direction of the price, fell 6.5
basis points to 1.720 percent <JP10YTN=JBTC>, pulling away from
a 10-month high of 1.805 percent hit last Thursday.
"JGBs are taking cues from the flight-to-quality type moves
seen in U.S. and European markets as concerns about the
financial sector re-emerged," said Naomi Hasegawa, senior
fixed-income strategist for Mitsubishi UFJ Securities.
JGB futures extended gains to rise a full point, with June
10-year futures <2JGBv1> rising as high as 135.52, up more than
a point on the day.
Crude oil prices fell slightly, with the July contract at
$127.24 a barrel, falling more than 50 cents. But crude prices
are still up a third since the start of the year, prompting
concerns over their drag on economic growth.
(Additional reporting by Satomi Noguchi and Masayuki Kitano in
TOKYO; Editing by Kim Coghill)
