HONG KONG (MarketWatch) -- Asian markets suffered deep losses Thursday, giving up gains from the previous session as investors focused on the weakening global economy, with China's main stock index dropping to more than two-year low while benchmarks in Japan, Hong Kong and Taiwan slumped more than 5%.
Resource stocks such as BHP Billiton were hit after crude-oil prices tumbled overnight, while exporters such as Canon Inc. were also weighed down by a strengthened Japanese yen.
"Now that the elections are out of the way, people will be focusing back on the economy and expectations are very weak for the [U.S.] jobs number" to be released this week, said Andrew Sullivan, sales trader at Main First Securities in Hong Kong.
"We saw a lot of people covering shorts yesterday, but we didn't see any conviction buying coming through with it, and you didn't see a huge amount of short-selling. I think people are just very undecided which way these markets go at the moment," he added.
On mainland China, the Shanghai Composite fell as low as 1,703.10, the benchmark's lowest since Sept. 14, 2006, before recovering. The index was recently down 2.5% at 1,716.63.
In Hong Kong, the Hang Seng Index slumped 6.4% to 13,889.42 and the Hang Seng China Enterprises Index lost 7.5% to 6,683.09.
The Nikkei 225 Average shrank 5.4% to 9,003.40 in Tokyo afternoon trading, while the broader Topix index shed 5.1% to 917.81.
The losses came after stocks on Wall Street slumped overnight, erasing strong Election Day gains from the previous session.
India's Sensitive Index, or Sensex, fell 3.7% to 9,742.02 in early trading.
Singapore's Straits Times Index dropped 3.6% to 1,801.74 and Taiwan's Taiex shrank 5.7% to 4,696.71.
Australia's S&P/ASX 200 shed 4.4% to 4,145.50 and New Zealand's NZX 50 index gave up 1.6% to 2,840.13. South Korea's Kospi lost 6.5% to 1,104.58.
"Even as Asia averts a credit crisis, de-leveraging persists, borrowing is more difficult, and 'cash is king'," wrote Merrill Lynch strategists led by Mark Matthews in a note.
"Stocks that should outperform in such an environment are ones that will still have high free cash flow yields, even if their earnings decline sharply. These are companies that will still be able to pay dividends and develop new projects, while others can't," they added.
The report listed Taiwan's Acer Inc. and Chunghwa Telecom Co. , Hong Kong's China Netcom Group Corp , Singapore's StarHub, British American Tobacco (Malaysia), India's Hindustan Unilever and Philippine Long Distance Telephone Co.among Asian companies with high free cash flow yields.
Regional detail
Exporters were hit hard in Tokyo on the yen's strength against the U.S. dollar, with Canon ) slumping 12.6% and Toyota Motor Corp. sliding 8.2%, while Sharp Corp. lost 10.1%.
In currency trading, the U.S. dollar bought 97.85 yen, compared with 99.40 yen late Wednesday.
Shares of Isuzu Motors plunged 16.8% on reports after the Nikkei business daily reported the company may buy a part of General Motors Corp.'s ) midsize-truck business, although it may not take over the operation in its entirety.
In Seoul, shares of Samsung Electronics Co. ) lost 4.3% and steelmaker Posco skidded 10.6%.
Shares of Cathay Pacific Airways slumped 13.3% in Hong Kong a day after the airline warned that 2008 financial results would be "disappointing" because of fuel hedging losses and lower revenue.
Other airlines in the region also declined after the warning, with Air China tumbling 9.7% in Hong Kong and 3.7% in Shanghai, Singapore Airlines shrinking 7.8% in Singapore. AirAsia lost 2.6% in Kuala Lumpur, while Jet Airways gave up 6.9% in Mumbai.
Resource stocks declined on a steep fall in crude-oil prices overnight, with BHPlosing 8% and Woodside Petroleum sliding 5.8% in Sydney, while Inpex Corp. lost 10.4% in Tokyo.
In Hong Kong, Cnooc slumped 9.7%, while PetroChina Co. gave up 6.8%.
December crude-oil futures slipped one cent to $65.29 a barrel in electronic trading recently, after dropping $5.23 to $65.30 a barrel Wednesday on the New York Mercantile Exchange.
Shares of Resona Holdings Inc. slid 3.6% in Tokyo, after the Nikkei business daily reported the company plans to integrate Resona Bank and Resona Trust & Banking Co. as early as spring, to benefit from the synergies.
In Sydney, shares of Telstra Corp. rose 0.7% in a weak market, after the telecommunications major reiterated its fiscal 2009 forecast.
On Wall Street, the Dow Jones Industrial Average slumped 5.1% to 9,139.27, as investors worried about the task ahead for President-elect Barack Obama in dealing with the poor shape of the U.S. economy. The S&P 500 index sank 5.3% to 952.77, while the Nasdaq Composite ) shrank 5.5% to 1,681.64.
