The FINANCIAL -- According to Dow Jones, Japanese stocks suffered steep losses January 21 to reverse two days of gains, with financials such as Sompo Japan Insurance and Mizuho Financial Group pacing declines after a fall on Wall Street, while the recent weakness in crude-oil prices hurt energy shares such as Inpex Holdings.
The Nikkei 225 average ended the morning session 3% lower at 13,451.77 and the broader Topix fell 2.4% to 1,309.58.
Drop of January 18 on Wall Street "suggests a similar decline is likely in Asia today before consolidating, given the lack of guidance from the U.S. for Tuesday's session," wrote IFR Markets chief economist George Worthington in a note. "Markets remain rightly preoccupied with the fear of an out-and-out U.S. recession," he added.
Australia's S&P/ASX 200 extended losses into an 11th session, dropping 1.6% to 5,6542.30 and New Zealand's NZX 50 index slipped 0.3% to 3,653.71, taking its losses into the 13th straight session.
In Hong Kong, the Hang Seng Index skidded 2.7% to 24,528.72 and the Hang Seng China Enterprises index lost 3% at 14,131.77.
Francis Lun, general manager at Fulbright Securities in Hong Kong, said the Hang Seng "may regain some of the lost ground later in the day, like it did on Friday, if the Shanghai index performs well."
"Volatility will remain high," he added.
China's Shanghai Composite dropped 2.3% to 5,060.33 and Taiwan's Weighted index shed 0.4% at 8,158.95, giving up early gains. Elsewhere, South Korea's Kospi lost 1.7% at 1,704.79 and Singapore's Straits Times Index dropped 1.4% to 3,060.57.
In a note to clients, CLSA Asia-Pacific markets managing director and equity strategist, Christopher Wood, wrote the troubles in the U.S. financial markets mean that in Asia, "risks of a further correction are rising. This means investors in Asia still need ideally to be hedged by remaining short Western financials."
Stocks in detail
In Tokyo, shares of Sompo Japan Insurancesank 3.6%, Mitsui Sumitomo Insurancegave up 5.2% and Mizuho Financial Group (MFG) lost 4.3% on continued worries about the health of the U.S. financial and housing sectors.
Financials elsewhere also dropped, with shares of Macquarie Groupsinking 3.1% in Sydney, HSBC Holdings (HBC) dropping 2.5% in Hong Kong, and DBS Group Holdings (DBSDY) losing 1.6% in Singapore.
Shares of Bank of Chinatumbled 4.7% in Hong Kong after the South China Morning Post reported Monday citing mainland banking sources that the Chinese lender is expected to announce a "significant write-down" of its investments linked to U.S. subprime mortgages. Bank of China announced in August that it held $9.65 billion worth of subprime-related securities.
Resource stocks also dropped sharply on a weak trend in commodity prices, with shares of Rio Tinto (RTP) losing 5.1% and Woodside Petroleum (WOPEY) stock sinking 3.9% in Sydney, Inpex Holdingsdropping 4.7% in Tokyo and PetroChina Co. (PTR) stock declining 3.9% in Hong Kong.
Trading in shares of China Eastern Airlines (CEA) was suspended in Hong Kong, while trading in shares of Air Chinawas suspended in Shanghai, after Air China's parent company on January 21 said it has made a proposal to buy up to 30% in China Eastern for at least HK$14.9 billion ($1.91 billion), according to reports. Shares of Air China, which continued to trade in Hong Kong, tumbled 10.6% following the reports.
In Asian currency trading, the U.S. dollar was little changed at 106.75 yen and the Australian dollar fell 0.3% to 93.68 yen.
February crude oil futures gained as much as 33 cents to $90.90 a barrel in electronic trading, after finishing 44 cents higher at $90.57 a barrel January 18 on the New York Mercantile Exchange.
On Wall Street, the Dow Jones Industrial Average (DJI) lost 59.9 points to 12,099.3, the S&P 500 index (SPX) dropped 8.06 points to 1,325.19 and the Nasdaq Composite (RIXF) fell 6.88 points to 2,340.02.