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HONG KONG: Asian shares were hit on Monday as a dive on Wall Street at the end of the week was compounded by the bankruptcy of US bank CIT, stoking further fears over the strength of the global economic recovery.
Dealers brushed aside last week's US data showing the world's largest economy had moved out of recession and instead focused New York's losses, where concerns over the financial sector were compounded by profit-taking.
Tokyo ended 2.31 per cent off and Sydney dropped 2.21 per cent, while Hong Kong was 1.72 per cent lower at noon. Seoul closed 1.37 per cent down.
However, there was a 0.49 per cent gain midday in Shanghai, where earlier falls were wiped away by figures showing an improvement in China's manufacturing sector.
Wall Street plummeted 2.51 per cent on Friday as confidence whipped up by the gross domestic product data was wiped out by worries that CIT Group, one of the largest small-business lenders in the United States, was in trouble.
Those fears were realised on Sunday when the bank filed for Chapter 11 bankruptcy with its board approving a "pre-packaged" restructuring plan to shed US$10 billion in debt.
The 101-year-old firm had struggled to stay afloat in the wake of the sub-prime mortgage debacle despite being rescued by a government bailout in July and receiving an emergency loan as recently as October 28.
In its filing to the US Bankruptcy Court in Manhattan, CIT reported total assets of US$71 billion and liabilities of nearly US$65 billion, making it the fifth largest bankruptcy in US history.
It said it aims to emerge from court protection by the end of the year.
The move also sparked fears over the health of the US financial system as the economy struggles out of crisis.
Dealers were also moved to take profits after the big gains on Friday, which capped a week of losses after the US announced its economy had grown a better-than-expected 3.5 per cent in the third quarter.
However, many analysts pointed out that the big rise was helped by the government's enormous stimulus measures including the highly successful "cash for clunkers" programme to boost the ailing car industry.
Markets were also nervous ahead of monetary policy decisions due this week in the United States, the Eurozone, Britain and Australia, as well as key US jobs data on Friday.
Despite the losses, market-watchers said markets could handle the bad news.
"People are disappointed (with the) slower-than-expected recovery of the US economy. But there's no doubt that the economy is on a recovery track, which will likely prevent a sharper decline," said Jung Seung-jae at Mirae Asset Securities in South Korea.
In China the HSBC China Manufacturing PMI, or purchasing managers index, was revealed Monday to have risen to an 18-month high of 55.4 in October from 55.0 in September.
A reading above 50 means the sector is expanding, while a reading below 50 indicates an overall decline.
A separate official PMI compiled by the National Bureau of Statistics showed manufacturing activity rose to 55.2 in October - the highest since May 2008 - from 54.3 in September.
On the country's new Nasdaq-style board, the ChiNext, 10 of the 28 firms were limit-down 10 percent after soaring on its debut on Friday.
- AFP/yb
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