* Obama's bank plan hits financial shares; reduces
liquidity * Falling commodity prices also hit Asia, spark
risk aversion
* Yen reaches nine-month high against euro; 5-wk high vs
dlr
By Raju Gopalakrishnan
SINGAPORE, Jan 22 (Reuters) - Asian stock markets tumbled
on Friday as commodity prices fell and the dollar weakened
after U.S. President Barack Obama proposed tough new
restrictions on banks, curbing investors' appetite for riskier
assets.
Japanese stocks <> fell almost 3 percent as the yen
surged against the dollar and the euro and as falling metal and
oil prices weighed on shares of resource-related firms.
Other Asian markets were also badly hit by the U.S.
proposal, which would squeeze banks' profits. South Korea's
KOSPI <> was down 1.87 percent while Hong Kong <> was
down over 2.5 percent. Banks have a heavy weighting in many
global benchmark share indexes.
The MSCI Asia-Pacific index excluding Japan <.MIAPJ0000PUS>
was down 2.4 percent and looked set for a loss of 5.2 percent
on the week.
"Of course, any sort of market regulation isn't good for
the market, and if you start limiting hedge funds that hurts
overall market flexibility," said Kenichi Hirano, operating
officer at Tachibana Securities in Tokyo.
"I don't think the proposal is very realistic and it's hard
to know if it'll ever come to pass, but investors want to wait
and see. Today's response is largely just a shock reaction."
Commodity prices fell because the proposed U.S. regulations
were seen as diminishing capital flows from banks, which have
provided liquidity for investors.
Shanghai copper tumbled, with the benchmark third-month
copper contract <SCFc3> down 2.2 percent, while gold <XAU>
hovered just above a three-week low of $1,088.30 hit overnight.
Crude oil <CLc1> fell 0.4 percent on a build-up in U.S.
gasoline inventories.
U.S. stocks fell as much as 2 percent overnight, the worst
one-day percentage fall since October, as financial shares in
particular were hit by Obama's plan to restrict banks'
ownership and investment in hedge funds for proprietary
trading, which is for banks' own profit and not related to
serving customers. []
The rules would restrict some banks' most lucrative and
risky operations, which Obama blames for helping to cause the
global financial crisis. See [] for more.
Global markets had already recoiled in recent weeks on
fears that Chinese demand would slow as Beijing tap the brakes
on its roaring growth to stave off inflation and keep the
economy from overheating.
Mixed data from the United States, meanwhile, have fueled
concerns that the pace of its economic recovery may be slowing,
and that corporate profits may not be as strong as first
expected this year. []
Other factors were in operation in Tokyo as well.
Toyota Motor Corp <7203.T> lost 3.3 percent to 4,050 yen
after it said on Thursday it would recall 2.3 million vehicles
in the United States to fix potentially faulty accelerator
pedals, broadening a recall that already ranked as its largest
ever.
Shares of Shin-Etsu Chemical <4063.T> lost 6 percent to
4,940 yen after the world's biggest maker of silicon wafers
used to make semiconductors reported a 53 percent fall in
quarterly operating profit, hurt by weak prices and a strong
yen, and it said it expected its annual profit to halve from a
year earlier.
Earlier, the euro, which has been under pressure from
Greece's debt troubles, hit a nine-month low against the yen at
126.55 yen <EURJPY=>, taking the dollar down with it.
The dollar lost ground and fell to its lowest in five weeks
on the yen <JPY=>, dropping as far as 89.85 yen before
steadying around 90.00. Support for the dollar is seen around
88.80/90 yen. []
The dollar index <.DXY> <=USD> was down about 0.2 percent
around 78.185, just below its 200-day moving average at 78.48,
which was seen as a zone of short-term resistance.
Investors flocked to safe-haven government bonds as the
equities and commodities sell-offs prompted a move out of
higher-risk assets. Benchmark 10-year U.S. Treasuries
<US10YT=RR> rose 14/32 of a point in price overnight before
pulling back.
March 10-year Japanese government bond futures rose 0.40
point to 139.38 <2JGBv1>. The benchmark 10-year JGB yield fell
3.0 basis points to 1.31 percent <JP10YTN=JBTC>, pulling away
from a two-month high of 1.365 percent hit earlier this month.
(Editing by Kim Coghill)
