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* Asian shares slump on concern about global economy
* Hedge funds seen booking profits on risky assets
* Yen supported by flight to safer assets
By Susan Fenton
HONG KONG, Oct 29 (Reuters) - Asian shares fell sharply on
Thursday after weak U.S. economic data rekindled investor
worries about growth, while hedge funds sold risky assets,
lifting the yen and supporting the dollar.
European stock index futures <STXEc1> pointed to a lower
open, adding to the previous session's sell-off and mirroring
the sharp drop on Wall Street.
Asian investors were unnerved by a surprise drop in U.S.
home sales last month, which followed a decline in consumer
confidence, highlighting risks to a recovery in the world's
biggest economy.
The MSCI index of Asia Pacific stocks traded outside Japan
<.MIAPJ0000PUS> slid 2.4 percent while the Thomson Reuters
index of regional shares <.TRXFLDAXPU> was down 1.4 percent,
marking a third session of losses.
"Everybody's been calling for a correction but I think the
speed and volume of what we're seeing has caught the market by
surprise," said Ben Potter, a research analyst at IG Markets in
Australia, where shares tumbled 2.4 percent.
"There has been a big change in underlying sentiment which
has triggered faint alarm bells."
High-yielding Australian and New Zealand currencies fell to
three-week lows and Indonesia's central bank was seen in the
market for a second day to support the rupiah <IDR=>.
Currency traders said hedge funds, whose flight from risky
assets had aggravated a sell-off in Latin American markets on
Wednesday, were seen taking profits on Asian investments ahead
of their business year-end in November.
Short-term speculators were also pocketing gains. However,
losses were restrained compared with Wednesday's 5 percent
slump in the MSCI's Latin American stock index <.MILA00000PUS>.
The New Zealand dollar <NZD=> came under additional
pressure after the central bank vowed to maintain record-low
rates until at least July 2010. The Australian dollar <AUD=> --
which has climbed about 40 percent against the dollar since
March -- hit $0.8942 at one point, its lowest point in three
weeks, while the rupiah hit a one-month low at 9,700 to the
dollar. It is still Asia's best performing currency this year,
up 13 percent.
ANZ CAUTIOUS
The yen's strength added pressure on shares of exporters in
Japan, driving the Nikkei index <> down 1.8 percent and
below the 10,000 points mark for the first time in three weeks.
The yen rose to as high as 90.25 to the dollar from 90.78
on Wednesday, when it gained more than 1 percent, while the
dollar was steady against a basket of currencies <.DXY> near
its highest in more than two weeks.
Foreign investors were pulling out of South Korea's stock
market, which saw the biggest net selling by foreigners this
year as the benchmark KOSPI index <> fell 1.5 percent.
Asian stocks have been among the strongest performers this
year though and each pullback has been taken as buying
opportunity to play the Asia growth story.
Disappointing U.S. home sales data on Wednesday
overshadowed news that U.S. durable goods orders rose for the
second time in three months and raised fears that U.S.
third-quarter gross domestic product, due out later on
Thursday, would fall short of forecasts for 3.3 percent
annualised growth.
Receding rate rise expectations in New Zealand heaped
pressure on the Kiwi dollar <NZD=D4>, which fell as far as
$0.7163, its lowest level in more than three weeks, after the
central bank kept interest rates on hold and said it expected
them to remain at a record low until July at least.
[]
While Norway followed Australia and raised interest rates
on Wednesday as its economy recovers from the global downturn,
New Zealand central bank governor Alan Bollard was notably
cautious about the global outlook on Thursday.
"There remain significant vulnerabilities and challenges to
be worked through in many economies," Bollard said in a
statement. "This process could weigh on global growth going
forward."
Australian banks have also been surprisingly cautious this
week, despite being far less affected by the crisis than their
U.S. and European peers.
Mike Smith, chief executive of Australia and New Zealand
Banking Group <ANZ.AX> said on Thursday the financial crisis
was only just beginning to play out and economies were fragile.
[]
"This isn't over yet," Smith said. "Often it's the
aftershocks that do the most damage."
The bank reported a strong recovery in second-half profits
but its cautious outlook helped its shares lose 2 percent.
Resources stocks were hit by falling commodity prices with
Australian mining giant Rio Tinto <RIO.AX> sliding 4.9 percent.
Australian bond futures rallied on safe-haven inflows and
as investors pared bets for a sharp rate rise next week.
Three-year bond futures <YTTc1> were 0.160 points higher at
94.81.
The oil price <CLc1> was down 0.2 percent at $77.22 a
barrel after losing $2.09 on Wednesday.
In Hong Kong, shares in PetroChina <0857.HK> slid 4.8
percent by lunchtime after disappointing third-quarter results
from the world's second-most valuable oil and gas producer.
Japan Airlines <9205.T> bucked the slide in Japanese
shares, rising 2.7 percent ahead of an announcement by the
government on a plan to restructure the struggling carrier.
[]
Japanese electronics giant NEC Electronics Corp <6723.T>
tumbled 8.3 percent after reporting on Wednesday a far bigger
quarterly loss than a year ago.
(Additional reporting by Adrian Bathgate in WELLINGTON;
Editing by Jan Dahinten)
