* Dubai debt fears jolt global markets
* Investors cut risk exposure, move to safe haven assets
* U.S. stocks futures down, Wall St. seen weak on reopen
* Dollar drops to fresh 14-year low against yen
* Nikkei closes at 4-month low, yen's rise also weighs
(Repeats to more subscribers)
By Umesh Desai
HONG KONG, Nov 27 (Reuters) - Asia stocks slumped on Friday
as shockwaves from Dubai's debt crisis hit the region, shaking
banking shares and boosting the yen to a fresh 14-year high
against a struggling dollar as investors unwound risky trades.
European shares were expected to open as much as 1.5
percent lower, extending the previous session's sharp sell-off
after Dubai said two companies planned to delay repayment on
billions of dollars of debt as a first step towarded
restructuring.
U.S. stock futures <SPc1> fell 3.5 percent, signalling a
rough day for Wall Street, which was closed on Thursday for the
U.S. Thanksgiving holiday.
The shock Dubai news raised investor fears of debt defaults
that could hit the global economy just as it is trying to
recover from the financial crisis.
The MSCI index of Asia Pacific stocks traded outside Japan
<.MIAPJ0000PUS> dropped 4 percent, while the Thomson Reuters
index of regional shares <.TRXFLDAXPU> fell 0.63 percent.
Japan's Nikkei average <> skidded 3.2 percent to a
four-month closing low, coming under additional pressure from
weakness in exporters as the yen climbed to its highest level
in 14 years against the dollar.
With the yen's rally raising concerns the Japanese economy
could slip back into recession, Japan sent its strongest signal
yet that it was considering intervening to weaken the yen with
the central banks asking several banks, both local and foreign,
for levels at which to buy dollars.
Banking shares were among the worst hit in the region on
concerns about potential exposure to the billions of dollars in
Dubai debt. The MSCI index of banking shares in Asia Pacific
outside Japan <.MIAPJFN00PUS> fell 4.3 percent.
HSBC <0005.HK> fell 8 percent to HK$86.60 in Hong Kong
after its London-traded shares <HSBA.L> lost 4.8 percent
overnight. Standard Chartered <2888.HK>, which fell 6 percent
in London <STAN.L>, dropped by around 7 percent to as low as
HK$188.60, its lowest since early October.
Japan's top bank, Mitsubishi UFJ Financial Group <8306.T>,
fell 2.2 percent.
South Korea, Hong Kong and Taiwan were the biggest drags on
the MSCI index, as these markets are most sensitive to the
global economy.
"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
fund manager Principal Global Investors in Hong Kong.
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 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 <XAU=> climbed to a record
high of $1,194.90.
Chandgothia said some of the declines in Asia falls could
also reflect investors locking in profits after a strong rally,
which has lifted the MSCI Asia Pacific ex-Japan index by over
60 percent this year.
"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. It's probably not a bad time to lock-in gains and let
things settle down before taking the next step," he said.
DEBT MARKETS
Jitters about Dubai, an influential global financial hub,
also hurt credit spreads as investors shied away from riskier
assets in general.
The Asia ex-Japan iTraxx investment-grade index
<0#ITAIGMPBMK=> widened to 124/129 basis points (bps), the
highest since Oct. 28, and compared with 112/114 bps on
Thursday.
U.S. Treasuries advanced as buyers looked to safer assets.
The benchmark 10-year note <US10YT=RR> rose 24/32 in price from
late U.S. trade on Wednesday to yield 3.18 percent, down about
9 basis points.
As investors unwound their riskier bets, 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
competitiveness, stalling the economy's nascent recovery.
"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.
Though Dubai's announcement was made on 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.
U.S. gold futures <GCZ9> fell more than 2 percent to a low
of $1,162.20 per ounce as the dollar bounced back against a
basket of currencies from a 15-month low hit the previous day
<.DXY>.
The rebound in the dollar also weighed on crude oil prices,
pushing U.S. futures <CLc1> below $75 a barrel.
(Additional reporting by Aiko Hayashi in TOKYO; Editing by
Neil Fullick & Kim Coghill)
((umesh.desai@thomsonreuters.com; +852 2843 6935; Reuters
Messaging: umesh.desai.reuters.com@reuters.net; )) (If you have
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