* Exporters under fire as demand seen drying up
* U.S. dollar at 2-year high vs euro
* Investors on default watch in emerging markets
By Kevin Plumberg
HONG KONG, Oct 23 (Reuters) - Asian stocks fell to a 4-year
low on Thursday on growing fears a global recession would
depress corporate earnings, while the dollar rose to a 2-year
high against the euro, underpinned by the unwinding of risky
trades.
Investors have mostly sought refuge in government debt of
the euro zone, Japan and the United States as well as the yen,
after credit market stabilisation in the last week unearthed a
renewed focus on the adverse impact of the financial crisis on
real economies, especially in emerging markets.
The cost of insurance against sovereign debt default in
countries such as South Korea, Indonesia and the Philippines
soared, with a sense of panic festering two days after
Argentina moved to nationalise its pension system. The step was
interpreted by investors as a desperate measure to stave off
default.
Markets in developing countries, especially those that
depend on portfolio flows to balance their current accounts,
were abandoned overnight, with almost no one spared from a
sharp slowdown in the global economy that has pushed crude
prices below $70 a barrel and dragged copper prices to a
three-year low.
The outlook for export-dependent Asian economies darkened,
hitting the shares of many high-profile companies that have
staked their business on overseas sales, such as Samsung
Electronics and Canon Inc <7751.T>.
"After a raft of U.S. earnings came out dismally, companies
are set to cut costs, mostly by laying off a significant
portion of their employees. Worry about massive unemployment
and its impact on the real economy is deepening,' said Kim
June-kie, a market analyst at SK Securities in Seoul.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 5.5 percent to its lowest since October
2004.
The global emerging markets index <.MSCIEF> was down 3.7
percent to a near 4-year low, and its 35 percent drop so far in
October outpaced the 25 percent decline on the all-country
world index <.MIWD00000PUS>.
Japan's Nikkei share average <> slumped 5.5 percent,
having now fallen 21 percent in October alone. Japanese
exporters have been undercut by the persistent strength of the
yen, which reduces their competitiveness. The yen hit a
five-year high against the euro <EURJPY=R> earlier on Thursday.
South Korea's KOSPI index <> fell 8.5 percent, led by
shares of Samsung Electronics <005930.KS> and steel producer
POSCO <005490.KS>.
Hong Kong's Hang Seng index <> was down 4.7 percent at
the lowest since April 2005.
Some property stocks managed to gain after the Chinese
government late on Wednesday announced policies to increase
homeownership [].
China Overseas Land's <0688.HK> stock rose 2.1 percent,
despite a 6.8 percent drop in mainland Chinese stocks listed in
Hong Kong <.HSCE>
"Yesterday's move can be considered part of an overall
effort to give a light stimulus to the economy, but in my view
is primarily focused on the real estate sector. These changes
also illustrate that the Party is capable of taking proactive
steps to deal with a changing economic environment," said Andy
Rothman, China macro strategist with CLSA in Shanghai.
"A good time to look at residential developer stocks," he
said in a report.
YEN IN DEMAND
The U.S. dollar struck a 2-year high against the euro while
the yen hit a near 6-year peak against the European single
currency as investors bailed on bets on higher-yielding and
emerging market currencies built up in recent years.
The euro slipped 0.3 percent from late U.S. trade to
$1.2815 <EUR=>. In early Asian trade, the European single
currency fell as low as $1.2726, its lowest since November
2006, on trading platform EBS. The euro slid as low as 124.15
yen <EURJPY=R>, its lowest since January 2003, before rising to
125.00 yen, down 0.5 percent on the day.
Analysts at banks such as Citigroup and Morgan Stanley
expect the yen to continue strengthening as Japanese banks and
investors slash their overseas exposure, though economic
conditions in Japan itself are deteriorating.
Japan's trade data showed exports in September were much
weaker than expected, with exports to the United States down 11
percent from the same month last year.
"Demand is weakening across the globe. Not to mention the
United States, falls in exports to the European Union are
accelerating," said Junko Nishioka, an economist with RBS
Securities in Tokyo. "Rising anxiety over the financial sector
appears to have affected economic activity."
U.S. light crude oil prices <CLc1> clung to small gains, up
43 cents at $67.18 a barrel, after hitting a 16-month low of
$66.20. Oil prices have fallen by a third in October in
anticipation of a steeper decline in demand from big consumers
such as the United States and China.
Indeed, a report earlier this week showed Chinese annual
economic growth in the third quarter slowed sharply to 9
percent compared with 10.1 percent in the second quarter.
(Editing by Jacqueline Wong)
