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TOKYO - Battered Asian stock markets suffered another drubbing on Friday, spiralling ever lower as panicky investors continued to dump shares with no end in sight to the recent turmoil on global markets.
An early rally on some markets quickly fizzled out as Tokyo set the region up for another nasty fall.
Japanese shares ended down by a massive 5.42 percent as a stronger yen pummelled exporters.
Investors fled "the crashing stock markets and headed to the safer bond market," said Akihiko Inoue, a strategist at Mizuho Investors Securities.
Hong Kong shares plunged 6.0 percent, Malaysian market slumped 5.08 percent while the Singapore bourse dived more than 5.0 percent in afternoon trade, as investors fretted that problems rippling out of the US mortgage sector could spark a full-blown credit crunch.
Elsewhere, markets were buckling again under heavy selling.
Seoul closed down 3.1 percent after plunging nearly 7 percent Thursday -- its biggest ever one-day point decline.
Manila ended 2 percent lower.
Indian share prices slid as much as 3.06 percent to fall below the key 14,000 point level before recovering slightly to 14,020.56.
Shanghai closed 2.28 percent lower while Bangkok declined 1.03 percent.
Australian shares closed down 0.70 percent while New Zealand stocks fell 1.63 percent in late trade.
"It's hard to believe that all the skeletons are out of the closet," said Eric Betts, an equity strategist at Nomura Securities in Sydney.
"Some of these (firms' problems) will only come to light if their lenders pull the plug on them or force them to come clean," he added.
For Asian markets the main worry is that foreign investment funds will be forced to further offload shares to cover losses in securities backed by US sub-prime mortgages to risky borrowers, or to stash funds in more stable bonds.
Overnight on Wall Street, US shares fell deep into the red again before recovering much of the losses to close slightly lower after another extremely volatile day, while the London market tumbled by over four percent.
In Tokyo a stronger yen dimmed prospects for Japanese exporters' future earnings, while uncertainty about whether the Bank of Japan will raise interest rates next week kept investors on edge.
An unravelling of risky "carry trades" that have allowed investors to binge on cheap Japanese credit to invest in fast-growing Asian stock markets appeared to be taking a heavy toll around the region.
The yen shot higher against other major currencies as players scrambled to unwind risky positions and send funds back to Japan.
The Australian and Japanese central banks injected extra liquidity into the banking system again Friday to try to calm markets but the focus of investors remained on events overseas.
Overnight on Wall Street the Dow Jones index ended lower for a sixth straight day, but pared back steep losses to end down 0.12 percent as the market tried to find a bottom.
The stock gauge had pitched to a more than 10 percent loss from its record intra-day trading peak of 14,021.95 on July 17 after American investors received a double dose of bad news tied to the housing market.
The US government reported that new home construction dived to a 10-year low in July, and Countrywide Financial -- America's leading mortgage lender -- said it had tapped an 11.5-billion-dollar credit line to boost its finances.
European stock markets took another dive Thursday, led by London where the FTSE 100 index of leading shares closed down 4.10 percent, its biggest fall since March 12, 2003, shortly before the outbreak of the Iraq war. - AFP/ir
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