Asian stock markets suffered another mauling yesterday as investors braced for more bad news on US mortgages, dashing hopes that the worst of the recent turmoil might be over.
The latest wave of selling came despite recent efforts by the world's major central banks to restore calm to global markets by pumping billions of dollars of emergency funds into the banking system.
Markets in Europe were bracing for another tough day after Wall Street slumped overnight.
Dealers said that although Asia's exposure to the US mortgage problems appeared to be limited, the fear was that foreign funds would be forced to sell Asian stocks to cover losses on subprime loans to risky borrowers.
"Things are still very shaky in the States and that's really driving a lot of the concerns at the moment," said Lorraine Tan, vice president of Asia equity research at Standard & Poor's in Singapore.
"The markets haven't stabilized yet. Unless there's some sign of things stabilizing it's still going to be very volatile," she said.
Japan's benchmark Nikkei 225 index lost 369 points, or 2.19 percent, to 16,475.61 points on the Tokyo Stock Exchange yesterday, its lowest since Dec. 8 when it closed at 16,417.82 points. The index rose 0.27 percent to close at 16,844.61 points on Tuesday.
A stronger yen hit exporters after the Japanese currency spiked up to four-month highs against the euro and the US dollar on an unwinding of risky carry trade bets that play on differences in global interest rates.
The Nikkei may be hit again if US stocks fall further, said Masanaga Kono, strategist at Societe Generale, and it may trade below the 16,000 level in the near future if the yen appreciates more against the US dollar.
In New Zealand, the benchmark NZX-50 index slipped below the psychological 4,000 barrier before ending down 1.5 percent at 4,004.46 -- its lowest closing since last December.
"It's not a particularly pretty day for the market. World markets are all just following each other at the moment and they're quite skittish," UBS equities director Paul Nicolson said in New Zealand.
Australia's S&P/ASX 200 closed down 176.8 points or 3 percent at 5,788. The benchmark index has now shed more than 10 percent of its value since reaching a record high on July 24 and is back to its mid-March levels.
Hong Kong's Hang Seng Index closed sharply down 631.6 points or 2.87 percent at 21,375.72, while the benchmark index in the Philippines closed 4.1 percent lower and Singapore lost 3.39 percent.
Stock markets were closed in India and South Korea for national holidays.
Shanghai's Composite Index was down 0.43 percent in late trade yesterday, cushioned somewhat by a positive response to news that regulators had eased rules on bond issues by listed firms, dealers said.
Analysts, however, remained optimistic that the impact on the Asian economies of the US loan problems would be limited.
Asian firms appeared to have limited exposure to the US subprime woes, Tan said.
"At this stage we still believe that the global economic picture is pretty much intact. Even if the US does slow a little bit it shouldn't have a significant impact on growth drivers" in Asia, she said.
Europe's main stock markets tumbled again in early trade yesterday. Shortly after European markets opened, London's FTSE 100 of leading shares stood 0.94 percent lower at 6,085.60 points and in Frankfurt the DAX 30 fell 0.76 percent to 7,368.60 points. The Paris CAC 40 sank by 1.3 percent to 5,407.43.