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Asia finishes with a frown
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January 22, 1999: 6:36 a.m. ET
Hong Kong, Seoul, Manila fall sharply on fears Brazil's troubles could spread
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LONDON (CNNfn) - The bogeyman of Brazil's financial crisis stalked Asia Friday, pushing markets across the region broadly lower as nervous investors wondered whether China may be mulling a devaluation of its own.
Warning signs on Brazil's economic radar - including an alarming 7 percent plunge in the real - coupled with fears that China may be one giant default waiting to happen, triggered large sell-offs in Hong Kong and Korea.
In Seoul, which suffered the worst decline, stocks plummeted 5.4 percent to close at 550.58.
Brazil's currency convulsions have sparked speculation that Argentina may abandon the peso and take up the U.S. dollar as its national currency.
Chinese debt problems weighed heavily on the Hang Seng index, which slid more than 3 percent to finish at 9,738.52, extending Thursday's losses amid a broad-based decline that took a chunk out of banking stocks.
The sell-off across the financial sector was spearheaded by the territory's largest bank, HSBC Holdings.
The sharp drop came after Thursday's report by the U.S. Commerce Department of a rise in the trade deficit to $15.5 billion in November, the largest gap since August.
The increase underscored fears that global economic turmoil may be rubbing off on the U.S., the mainstay of the global economy.
In the Pacific Rim, Friday's declines were abetted by the sliding Brazilian currency and fears the Chinese yuan may be ripe for devaluation.
One fear is that a devaluation of the yuan, coupled with a sudden outbreak of bankruptcies among China's red-chip companies, could rekindle the Asian crisis just as many countries in the region are staggering back to their feet.
The exodus of foreign capital from Brazil in recent days, after the government abandoned its defense of the currency, has not helped to allay these concerns.
In Tokyo, the Nikkei index ended down just over 91 points, or 0.64 percent, at 14,154.40, beset by weakness among high-tech manufacturers and fresh questions about the financial health of construction firms.
But government talk about stepping up the timetable on economic reform helped stem further losses, traders told Reuters.
Singapore's Straits Times Index was also pressured by Brazil, easing nearly 1.7 percent to close at 1,478.75.
"There is still a lot of selling around because we have had quite a bit of short-term bad news," Percy Au-Yong, sales director at DBS Securities, told Reuters.
The real's tumble pressured other markets as well.
Philippine shares took a nose-dive, plunging 3.75 percent to 2,062.34 amid a brisk sell-off of shares in Philippine Long Distance Telephone Co. after a local newspaper reported creditors at one of the company's subsidiaries are demanding PLDT should help pay off the unit's debt.
In Sydney, the All Ordinaries index eased 0.13 percent as investors took a cue from the Dow Jones industrial average and remained extra cautious.
Alone among Pacific Rim markets, Malaysia's Kuala Lumpur index overcame the negative sentiment, climbing nearly 1 percent to close at 618.54.
But Taiwan, afflicted by spillover from the Dow's downturn Thursday, fell 1.6 percent to 6,228.95.
Thai stocks, pressured by bank selling, ended down nearly 3 percent, while Jakarta, heeding the regional rumbles, slipped 1.51 percent.
--from staff and wire reports
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