Asian stocks slumped, dragging the MSCI Asia Pacific Index down the most in eight weeks, on concern over losses stemming from Dubai's attempt to reschedule its debt and as the yen strengthened against the dollar.
Obayashi tumbled 13 per cent in Tokyo after Daiwa Securities Group said Japanese builders may not receive some revenue from Dubai. Honda lost 3.3 per cent as the US dollar traded near a 14-year low against the yen. BHP Billiton, the world's largest mining company, slumped 3.3 per cent in Sydney after crude oil and copper prices dropped yesterday.
The MSCI Asia Pacific Index sank 1.8 per cent to 115.49 in Tokyo, the biggest drop since October 2. Declines in Asia followed the MSCI World Index's 1.4 per cent drop yesterday. Dubai World, the government investment company burdened by $US59 billion of liabilities, roiled markets by seeking to delay repayment on much of its debt.
"It is too early to say that this event on its own will prove to be a turning point in the markets, but it does serve as a reminder that dislocations remain in the financial system globally," said Tim Schroeders, who helps manage $US1.1 billion at Pengana Capital Ltd. in Melbourne. "Investors need to remain ever vigilant regarding risk."
Japan's Nikkei 225 Stock Average fell 1.8 per cent, while Hong Kong's Hang Seng Index slumped 3.1 per cent. Australia's S&P/ASX 200 Index declined 2.8 per cent.
Futures on the U.S. Standard & Poor's 500 Index sank 2.2 per cent. U.S. markets were closed yesterday for the Thanksgiving holiday. Dubai concerns drove Europe's Dow Jones Stoxx 600 Index down by 3.3 per cent, the most since April 20.
Dubai, which borrowed $US80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world's steepest property slump in the first global recession since World War II. Home prices fell 50 per cent from their 2008 peak, according to Deutsche Bank.
"People are worried about the contagion effect from Dubai," said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $US75 billion in assets. "Events like this bring back all the bad memories from the global financial crisis. The market has rallied a long way and is very sensitive to any bad news around debt default or financial problems."
The MSCI Asia Pacific Index has climbed 64 per cent from a more than five-year low on March 9 amid signs government stimulus measures were reviving economies around the world.
