Asian stocks tumble as yen surges*

POSTED: 0832 GMT (1632 HKT), March 5, 2007

Story Highlights
• NEW: Japanese shares slide more than 3 percent
• Nikkei's fall below 17,000 is the first time since January
• Japanese exporters further hurt by the strength in the yen
• Markets will remain weak since global markets keep falling

SINGAPORE (Reuters) -- Asia's battered stock markets tumbled again on
Monday, as a global sell-off that began last week gathered fresh steam,
with Japanese shares sliding more than 3 percent as a surging yen
hammered exporters such as Toyota.

The yen hit three-month highs against the dollar and the euro as
investors rushed to close out risky trades and pay off the cheap yen
loans that financed them.

Major European markets are expected to open down around 2 percent on
Monday, financial bookmakers said. Britain's FTSE 100 is expected to
open 1.8 percent lower, while Germany's DAX and France's CAC 40 are
expected to open down 2 and 2.2 percent, respectively.

"If New York continues to slide and the yen continues to strengthen at
this pace, there is no bottom in sight for Japan," said Kirby Daley, a
strategist at brokerage Fimat in Tokyo.

A near 9 percent slump in China's main stock index last Tuesday,
combined with worries about stalling U.S. growth, sparked a wave a
selling in world equity markets, many of which had been trading around
record highs.

Australian stocks fell 2.3 percent to a seven-week closing low, erasing
all their gains for 2007, with the world's largest miner, BHP Billiton,
dropping 2.9 percent.

Share indexes in Hong Kong, Taiwan and Singapore lost between 3 and 4
percent and South Korea's benchmark fell 2.7 percent.

"This is not like September 11, when there was a clear issue, so the
sell-off was reasonable," said Lim Chang-gue, a fund manager at Samsung
Investment Trust Management in Seoul.

"Something bad seems to be happening, but there is no one clear reason.
It's this unknown that is making it worse so people are just selling out."

Fears about the health of the global economy knocked more than 1 percent
off oil prices, while Japanese government bond and U.S. Treasuries
futures rose to around three-month highs, as investors fled stocks and
commodities in search of safer assets.

The yen rose across the board, with sterling plunging as much as 2
percent and other major currencies more than 1 percent, as market
players unwound bets against the Japanese currency.

The so-called carry trade, in which investors fund the purchase of
higher-yielding -- and riskier -- assets with borrowing in the
low-yielding yen, had driven the yen to a four-year low against the
dollar in late January.

"The situation has changed now, with volatility no longer low to support
the carry trades, and the unwinding of long positions in riskier assets
spurred by the global stock market plunge is continuing," said a bond
dealer at a Japanese trust bank.

The dollar tumbled to a three-month low at 115.40 yen, before trimming
losses slightly to trade around 115.55 yen by 0550 GMT. The euro bought
around 152.25 down 1.2 percent, having fallen as low as 151.75 yen.
Yen worry

Tokyo's Nikkei fell below 17,000 for the first time in nearly two months
to end down 3.3 percent, its biggest one-day percentage loss since June
last year and its lowest close in 2007.

"The real worry is the currency," said Masayoshi Okamoto, head of
dealing at Jujiya Securities.

"Toyota has assumed an exchange rate of 115 yen to the dollar for the
fourth quarter. While we're already close to that, the thing is that
investors were buying Toyota on the assumption the exchange level would
be around 120 yen."

Toyota, the world's most profitable car maker, fell 3.2 percent. Cameras
and copiers maker Canon dropped 2.1 percent and Sony shed 2.9 percent. A
stronger yen tends to hurt exporters because it erodes the value of
their overseas sales.

MSCI's broadest index of Asian shares outside Japan was down 3.7 percent
at 0550 GMT.

A measure of emerging Asian markets fell 4.1 percent, after diving 5.4
percent last week, and an index of Hong Kong-listed shares in mainland
China firms, or H-shares, fell 5.3 percent, led by financials such as
China Life

In the Japanese government bond market, lead March futures were up 0.44
point at 135.26, climbing towards a three-month high of 135.44 hit last
week. The benchmark 10-year yield fell 4.5 basis points to 1.620 percent.

"A growing view that recent falls in share prices may not be just a
temporary correction is giving the JGB market support," said Masuhisa
Kobayashi, chief JGB strategist at Barclays Capital.

"Investors were cautiously hoping for the equities markets to steady
this week but the Asian markets have continued to fall, so that's making
people nervous," said Dariusz Kowalczyk, an analyst at Hong-Kong based
CFC Seymour Ltd.

Gold eased to around $640.80 an ounce, after sliding nearly 3 percent on
Friday, when currency investors sold the precious metal to pay for
losses in other markets.