* Dubai debt fears jolt global markets
* Investors cut risk exposure, move to safe haven assets
* U.S. stocks futures down, Wall St. seen weak on reopen
* Dollar drops to fresh 14-year low against yen
* Nikkei at a 4-month low, yen's rise also weighs
By Umesh Desai
HONG KONG, Nov 27 (Reuters) - Asian stocks slumped on
Friday as shockwaves from Dubai's debt crisis hit the region,
shaking banking shares and pushing the yen to a fresh 14-year
high against a struggling dollar as investors unwound risky
trades.
European shares were expected to open as much as 1 percent
lower, extending the previous session's sharp sell-off after
Dubai said two companies planned to delay repayment on billions
of dollars of debt as a first step towarded restructuring.
[].
U.S. stock futures <SPc1> fell 3 percent, signalling a
rough day for Wall Street, which was closed on Thursday for the
U.S. Thanksgiving holiday.
The shock Dubai news raised investor fears of debt defaults
that could hit the global economy just as it is trying to
recover from the financial crisis.
The MSCI index of Asia Pacific stocks traded outside Japan
<.MIAPJ0000PUS> dropped over 3 percent, while the Thomson
Reuters index of regional shares <.TRXFLDAXPU> fell 0.63
percent.
Banking shares were among the worst hit on concerns about
potential exposure to the billions of dollars in Dubai debt.
The MSCI index of banking shares in Asia Pacific outside Japan
<.MIAPJFN00PUS> fell over 3.5 percent.
HSBC <0005.HK>, whose London-traded shares <HSBA.L> lost
4.8 percent overnight, fell 6.1 percent to HK$88.40 in Hong
Kong. Standard Chartered <2888.HK>, which fell 6 percent in
London <STAN.L>, dropped 6.4 percent to as low as HK$190, its
lowest since Oct 29..
Japan's top bank, Mitsubishi UFJ Financial Group <8306.T>,
fell 3.8 percent.
Japan's Nikkei average <> skidded 3.2 percent to a
four-month low, coming under additional pressure from weakness
in exporters as the yen climbed to its highest level in 14
years against the dollar.
South Korea, Hong Kong and Taiwan were the biggest drags
on the MSCI index, as these markets are most sensitive to the
global economy.
"Some of the tensions can spill over into those economies
which are externally dependant for funding their investment
plans," said Binay Chandgothia, chief investment officer at
fund manager Principal Global Investors in Hong Kong.
Dubai said on Wednesday it wanted creditors of state-owned
Dubai World and its property subsidiary Nakheel, to agree to a
debt standstill in a first step towards restructuring.
Dubai World, the conglomerate that spearheaded the
emirate's breakneck growth, had some $59 billion in liabilities
as of August. []
The announcement sparked immediate rating downgrades of
several government-related entities and sent the cost of
insuring against the emirate's debt soaring and bond prices
tumbling.
European shares had their worst daily percentage loss in
seven months on Thursday and gold climbed to a record high of
$1,194.90.
DEBT MARKETS
Jitters about the state-owned firms in Dubai, an
influential global financial hub, also hurt credit spreads as
investors shied away from riskier assets in general.
The Asia ex-Japan iTraxx investment-grade index
<0#ITAIGMPBMK=> widened to 124/129 basis points (bps), the
highest since Oct. 28, and compared with 112/114 bps on
Thursday.
U.S. Treasuries advanced as buyers looked to safer assets.
The benchmark 10-year note <US10YT=RR> rose 19/32 in price
from late U.S. trade on Wednesday to yield 3.197 percent, down
about 8 basis points. *
Chandgothia said some of the Asian falls could also reflect
investors locking in profit after a strong rally, which has
lifted the MSCI Asia Pacific ex-Japan index by over 60 percent
this year.
"Even those who came in late into the rally late have made
decent money, so there would be a tendency to take risk off the
table. It's probably not a bad time to lock-in gains and let
things settle down before taking the next step," he said.
As investors unwound their exposure to riskier assets, the
yen <JPY=> soared against the dollar to a fresh 14-year high
and also traded stronger against higher-yielding currencies
like the Australian dollar <AUD=>. []
The yen's rise has raised concerns it could hurt export
earnings and push the Japanese economy back into recession.
"Similar stories as this Dubai one are likely to continue
to come out, leading risk money to pull out from assets such as
commodities and stocks," said Takahiko Murai, general manager
of equities at Nozomi Securities.
Though Dubai's announcement was made on Wednesday, Asian
markets were slower to react that those in other regions.
"Although there was talk of it before, there was
uncertainty about the full impact," Andrew Sullivan, a sales
trader with broker MainFirst Securities in Hong Kong, adding
that initially it was seen as a debt restructuring exercise
before the default fears set in.
"Until the details became clear, people were not so
worried about the downside. It is a delayed reaction because
more information became available overnight," he said.
Gold in Asia was hovering just below Thursday's record
high while oil prices stood just below $76 per barrel.
(Additional reporting by Aiko Hayashi in TOKYO; Editing by
Neil Fullick & Kim Coghill)
((umesh.desai@thomsonreuters.com; +852 2843 6935; Reuters
Messaging: umesh.desai.reuters.com@reuters.net; )) (If you have
a query or comment on this story, send an email to
newsfeedback.asia@thomsonreuters.com)
((For the state of play of Asian stock markets please click
on: <>))
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope Blog, click on
http://blogs.reuters.com/macroscope
* For Hedge Fund Blog, click on
http://blogs.reuters.com/hedgehub
((If you have a query or comment on this story, send an email
to news.feedback.asia@thomsonreuters.com))
