Asian markets plunge after Wall Street pullback and as dollar falls to 12-year low vs yen

BANGKOK, Thailand - Asian markets plunged Thursday in the wake of Wall Street's retreat from its biggest rally in five years, with regional investors worried by the sliding dollar and ongoing troubles in the U.S. economy.

The dollar's drop to 100.02 yen _ a 12-year low _ hammered stocks of Japanese exporters such as Toyota and Sony, whose overseas earnings are eroded by a stronger yen. The Nikkei 225 index tumbled 3.3 percent to 12,433.4, its lowest close in 2 1/2 years.

In Hong Kong, the Hang Seng Index fell nearly 5 percent to settle at 22,301.6. Market benchmarks fell more than 2 percent in Australia, India, Indonesia, Malaysia, South Korea and Taiwan.

Asian markets, which had rallied Wednesday on news of the U.S. Federal Reserve's US$200 billion (?129 billion) relief plan for tight credit markets, resumed their slide amid pessimism that the move will prevent a U.S. recession.

"This is just an extremely nervous market given the uncertainties overhanging the outlook for the world," said David Cohen, a regional economist with Action Economics in Singapore. "The clouds are the combination of the oil prices, the nervousness about the U.S. slipping into recession and dragging down the global economy and ... the turmoil in the credit markets that doesn't want to go away."

Traders were disheartened by an overnight drop on Wall Street, where the Dow Jones industrial average slipped 0.4 percent Wednesday after surging 3.55 percent Tuesday.

While many investors regard the Fed's plan to lend Treasurys in exchange for debt tied to mortgages as a positive step, they are hesitant to pour more money into stocks without signs the U.S. economy is reviving.

"People are still very unsure whether or not it will work. One day they rally on it, the next day they're wary whether it will do the trick," said Cohen.

In Tokyo trading, Toyota Motor Corp. and Honda Motor Co. fell 3 percent and 4.2 percent respectively. Sony Corp. shares sank 4 percent.

Japanese financial shares were also hit hard, with Mizuho Financial Group and Mitsubishi UFJ Financial Group each dropping 6.8 percent, and Sumitomo Mitsui Financial Group skidding 7.3 percent.

"We're not going to see the end of (the credit problems) for a while. There's going to be continued disclosures of write-offs and certainly the financial sector is going to be vulnerable," said Cohen.

Meanwhile, commodity-related stocks rose, sidestepping the overall market decline as crude futures traded near the overnight record high. Inpex Holdings rose 5.1 percent and Showa Shell added 3.2 percent.

In South Korea, steelmaker Posco plunged 6.2 percent, shipbuilder Hyundai Heavy Industries fell 4.9 percent and Samsung Electronics _ the country's largest corporation _ fell 1.8 percent.

Besides worries about continuing fallout from the global credit crisis, investors are worried about increasing inflation pressures from the record high oil prices. They are concerned those pricing pressures could limit the U.S. Fed's ability to reduce interest rates further and boost lending efforts to spur the economy.

Oil futures hit a trading record above US$110 a barrel overnight and were at US$109.80 midafternoon in Singapore.

The dollar also fell to its lowest level ever against its Singapore counterpart, dropping as low as S$1.3821 in morning trade.