Asia stocks at 2-yr low as credit fears bite

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Most Asian markets shoot up after US stunning rall...Asia stocks at 2-yr low as credit fears biteAsian stocks fall on growth fearsUS economy fears plague stocks, buoy bonds

Hong Kong, August 19: : Asian stocks fell to a two-year low on Tuesday, led by exporter shares, on fears the US government will have to bail out the top mortgage finance companies, further destabilising the financial sector.

Wall Street tumbled and shares of Fannie Mae and Freddie Mac fell to the lowest in nearly 20 years after an article in Barron's said a government bailout could wipe out existing holders of the two companies' common stock with other asset holders also suffering losses.

The news seemingly put the bottom in the worst housing crisis since the Great Depression further out of reach, and confounded those expecting a US recovery, at a time when the euro zone and Japanese economies are shrinking and could be lumbering toward recession.

Worries about the global economy bolstered government bond prices, while the dollar was largely steady -- taking a break from its sharp gains over the past two weeks.

"There's a bit of a down draft from what happened in the US overnight and commodities are a bit weak, too," said Michael Heffernan, a strategist and senior client adviser at Austock Securities in Sydney.

Japan's Nikkei share average tumbled 2.65 per cent to a one-month low. Shares of index heavyweights Fast Retailing Co Ltd, a clothing retailer, and Canon Inc were among the biggest drags.

The MSCI pan-Asia equities index fell 1.7 per cent to its lowest since July 2006, down 22 per cent this year, while the MSCI's Asia-Pacific ex-Japan index fell for a third straight session to a 17-month low.

South Korea's KOSPI fell 2.15 per cent, led down by consumer technology giant Samsung Electronics Co Ltd and the world's fourth-largest steelmaker POSCO

Hong Kong's Hang Seng index declined 1 per cent, led by property firms ahead of earnings due in the next few weeks.

"The Chinese stock market's steep losses since the Olympics (began) are also denting sentiment towards heavy industry such as steel makers and shipbuilders. There are worries the Chinese economy may not grow as robustly after the Olympics," said Won Jong-hyuck, a market analyst at SK Securities in Seoul.

Japanese government bonds climbed as equity markets declined, boosted by gains in US Treasuries.

Bonds continued to draw support from worries about domestic and global economies, underscoring the prevailing view that the Bank of Japan will keep interest rates steady.