Asian stocks close lower after attacks

By staff and wire reports

HONG KONG, China -- Asian stock markets closed lower Monday in the first trading sessions after joint U.S.-British attacks in Afghanistan.

All the Asian markets that were open lost ground. Japanese stock markets were closed for a holiday.

Hong Kong's Hang Seng index closed down more than 300 points or just over 3 percent to 9967.83.

Indonesia slumped more than 4 percent. The market in the Philippines showed a similar steep drop, falling 3.65 percent to a 10-year low.

Both countries are home to Islamic militant movements, so they are expected to see disruption and anti-American demonstrations in the aftermath of the attacks.

More broadly, the selloff in Asia was more orderly and far less dramatic than on September 12, the day after hijackers flew planes into the Pentagon and the World Trade Center.

Currencies also suffer

Asian currencies were buffeted by the military action in Afghanistan. Oil and gold prices got a small boost, but less than expected by some traders.

The yen strengthened to 119.84 to the dollar, which also lost ground against European currencies such as the Swiss franc. It was mildly weaker against the euro.

The central Bank of Japan stepped in extremely aggressively last week to stop the Japanese currency from getting much stronger against the dollar.

Traders expect the BOJ to intervene again if the yen gains more ground. That would make Japanese exports less attractive and reduce the overseas sales of Japanese companies when sent back home.

The Indonesian rupiah was particularly hard hit Monday, bursting back through the 10,000 barrier. It had settled below that level after President Megawati Sukarnoputri took over from ousted leader Abdurrahman Wahid.

It was trading at 10,250 to the dollar on Monday afternoon, near its weakest level of 10,500. Further weakness to the currency poses a serious threat to its economy, one currency trader said, which was already not in great shape.

The United States warned Americans in Indonesia to prepare for possible evacuation, as Islamic militants called for demonstrations against the United States in the world's largest Muslim nation.

The Jakarta composite index fell 4.1 percent to 365.923.

The Philippines has also seen Muslim activism, with a separatist movement fighting the domestic army in the south.

The possibility of a dramatic response to the American-led attacks pushed the Philippines composite index down 3.65 percent to 1,048.67.

The peso weakened to 51.60 to the dollar, a modest shift. The effect on the economy of the Philippines, where Muslim activism is mainly limited to the very south of the country, is likely to be less dramatic than in Indonesia.

The financial world had been readying for a U.S. response, so market movements were not dramatic Monday after the first wave came.

Overseas interest off the boil

Still, investors have moved assets away from Indonesia and the Philippines, as well as Malaysia, worried about the uncertainty over the response of militants there.

The currencies in those countries have come under pressure because, although the militant presence is a small minority in each country, overseas companies are rethinking their operations or investments there.

The Malaysian ringgit is pegged to the U.S. dollar. But that peg is likely to face a renewed threat now.

The Kuala Lumpur Stock Exchange Composite index fell 1.4 percent to 600.33.

Other Asian markets saw similar small drops.

Australia, New Zealand have quiet losses

Hong Kong's Hang Seng index was down 3 percent at 9,967.83 at the close. It maps the moves in U.S. stocks, given Hong Kong's U.S.-linked currency and interest rates.

U.S. markets will be open Monday despite the Columbus Day holiday there.

Australia's S&P/ASX 200 index ended off 1.2 percent or 39.2 points at 3,139.9. That was a recovery from its 1.5 percent loss for much of the day.

Trading was light, as investors waited for Wall Street's reaction. Australian investors hinted they expect that to be negative.

Sydney's largest listing, News Corp., closed down 5.3 percent at A$12.75. The media conglomerate gets around 70 percent of its profits in the United States.

Trading was also quiet across the Tasman in Wellington, where the benchmark NZSE-40 Capital index dropped 0.4 percent to 1,889.07.

In Seoul, the benchmark Kospi ended down 1.15 percent at 496.13.

Taiwan's benchmark Taiex index lost 1.8 percent to finish at 3,520.35. It had earlier lost as much as 2.5 percent. Electronics stocks, which drive the market, were slightly weaker than most, with that subindex down 1.9 percent.

Singapore's Straits Times index was down about 2.8 percent to 1346.99 in late trading.

Reuters contributed to this report.