Asian stocks slumped on Friday to their lowest since early December, led by big losses in South Korea, as fears about the global economy and the financial sector led investors to shed riskier assets.
In a tough week for global markets, the MSCI index of Asia-Pacific stocks outside Japan is headed for an 8 percent slump for the week -- its worst since a 10 percent weekly drop in late November when the gauge touched five-year lows.
The sell-off in U.S. markets overnight following weak U.S. employment data and fears of nationalization of U.S. banks spread into Asia, with European shares also set to track these losses, as investors shift to safer assets such as U.S. Treasuries and the dollar.
The tough markets indicate that a deluge of rescue packages -- with measures ranging from increased spending in the United States to the outright buying of corporate debt in Japan -- has yet to win over investors.
"The biggest problem is that there are very few buyers in the market. Risk tolerance of global investors is falling," said Takashi Kamiya, chief economist at T & D Asset Management.
"Even though countries like Japan and the United States are expanding their government spending, consumer demand hasn't followed due to heavy consumer debt, and that will prevent the economy from a full-fledged recovery."
The MSCI index of regional stocks outside Japan slumped 2.9 percent as of 2:05 a.m. EST, after earlier hitting its lowest level since December 2. The gauge is not far off from a low of 194.03 hit in late November.
The latest fall comes after data on Thursday showed U.S. workers drawing unemployment aid jumped to a record at nearly 5 million, suggesting the 13-month-old U.S. recession is deepening.
In another bad omen for Asian exporters that depend on the recovery of the world's largest economy, U.S. lender stocks hit 17-year lows on fears they would be nationalized, reflecting concerns about the stability of the financial sector.
Other sources of concerns abound. Japan's central bank said on Friday a deterioration in corporate profits had gathered pace, while investors also fret about the economic gloom gripping cash-strapped eastern Europe.
South Korea, another country that has been hit hard by the crisis, on Friday saw its main KOSPI index slump 3.7 percent to its lowest close in more than two month, while the won currency slid for a ninth consecutive session on fears domestic banks will struggle to access overseas capital markets.
Japan's Nikkei average .N225 fell 1.9 percent to its lowest close since October 27, while the broad-based Topix index slumped 12 points to its lowest close since January 1984.
Among steep decliners were financials such as South Korea's Shinhan Financial Group (055550.KS). Exporters also fell, with Japan's tire maker Bridgestone Corp (5108.T) sliding 7.4 percent a day after forecasting a bigger-than-expected slide in profits this year.
