* MSCI Asia ex-Japan falls to 2-year low
* Japan, South Korea stocks down 5-6 percent
* 10-yr Japanese govt bond future hits upper trading limit
* Crude falls to below $93 as risky assets are dumped
By Kevin Plumberg
HONG KONG, Sept 16 (Reuters) - Asian share markets tumbled
on Tuesday, with Japanese, Hong Kong and South Korean stocks
down 5-6 percent, as upheaval on Wall Street fuelled investor
uncertainty about a spillover into the region.
Government debt was in heavy demand for a second day with
increased speculation about an aggressive U.S. Federal Reserve
interest rate cut later, and shares outside Japan hit a 2-year
low after one of the most explosive 48-hour periods in the
finance world.
Lehman Brothers <LEH.P> filed for bankruptcy, Bank of
America agreed to buy Merrill Lynch, the Fed expanded its
emergency liquidity provisions and American International Group
(AIG), once the world's biggest insurer, was seriously
constrained by short-term funding trouble. []
Investors ditched oil and sought stability in the yen and
high-grade debt. Crude prices fell for the sixth of the last
seven days, to below $93 a barrel <CLc1>, the lowest since
February.
"There is no hiding for anyone here. The global money pool
-- we all either have to chip into it or get some money out of
it, and we're all affected by it," said Credit Suisse chief
strategist Adnan Kucukalic in Sydney.
Tokyo's Nikkei share average <> dropped 4.7 percent to
its lowest this year.
Markets in Japan, South Korea, China and Hong Kong had been
closed on Monday, and quickly followed the falls in New York,
where the Dow Jones industrial average <> slid more than
500 points, or 4.4 percent, in its biggest one-day point drop
since the September 2001 attacks. The Nasdaq Composite Index
<> fell 3.6 percent.
The financial sector was hit by a wave of selling. Shares
of Japan's top lender Mitsubishi UFJ Financial Group <8306.T>
fell 9.8 percent, Macquarie Group <MQG.AX> dropped 7.5 percent
and led the benchmark Australian index <> down 2.5
percent.
An MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was down 2.5 percent to the lowest since
September 2006, and has now slumped 43 percent from a peak last
October.
South Korea's KOSPI stock index <> plunged 5.9
percent, led down by Samsung Electronics <005930.KS>, to its
lowest since March 2007, and Hong Kong's Hang Seng <>
opened more than 5 percent lower.
Developments were fluid.
AIG secured a $20 billion lifeline brokered by New York
State officials on Monday, but Standard & Poor's cut its
long-term counterparty rating on the insurer. Moody's also
downgraded AIG's senior unsecured debt rating.
"The U.S. financial system is never going to be the same.
Events of the last 24 hours are positive, but there is likely
more pain on the near-term horizon," said Donald Straszheim,
vice chairman of Roth Capital Partners in Los Angeles, in a
note.
The U.S. dollar slipped to 104.31 yen after ending
overnight in New York around 104.54 yen. It had its biggest
single-day decline against the yen on Monday in nine years.
The euro edged down to $1.4218 after ending at $1.4263 on
Monday.
The U.S. dollar was dumped on Monday as markets quickly
priced in an 84 percent chance <FEDWATCH> of a
quarter-percentage point rate cut by the Fed after a meeting
later.
Japanese and U.S. government debt yields, which move in the
opposite direction to prices, dropped as investors sought
safety.
The 10-year Japanese government bond future was up 3 points
to its daily limit at 140.35 <2JGBv1>. The yield on the 10-year
bond in the cash market fell to a 5-month low of 1.375 percent.
The yield on the policy-sensitive U.S. two-year Treasury
note <US2YT=RR> fell to 1.69 percent to the lowest since
mid-April.
Oil <CLc1> dropped $3 a barrel to $92.71, its lowest since
mid-February. Crude was thrown into the pile of assets being
liquidated by investors around the world to fund losing bets
and to cut their exposure to risk.
(Additional reporting by Sonali Paul in MELBOURNE)
(Editing by Ian Geoghegan)
