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Asian stocks tumble on Korean test

By Alex Frew McMillan

North Korea's missile test comes on the same day South Korea welcomes a new president

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HONG KONG, China (CNN) -- Asian stocks were knocked lower going into afternoon trade by North Korea's decision to test fire a missile into the Sea of Japan.

South Korea is taking the biggest hit, down almost 3 percent. Taiwan has lost 2.5 percent and Japan is off more than 2 percent.

North Korea in 1998 fired a missile over Japan into the Pacific. This latest test significantly increases the tension over the North's nuclear program. (Korea tests missile)

The missile test comes on the day new South Korean President Roh Moo-hyun was sworn in, an inauguration attended by Japanese Prime Minister Junichiro Koizumi and other dignitaries. (New Korean president sworn in)

Tokyo's Nikkei average ended the morning down 2.19 percent at 8,377.75, a three-week low, though it is recovering slightly as the afternoon sets off.

Japan, which has been eyeing its North Asian neighbor with increasing suspicion, says it is not clear whether North Korea's test is a national security threat.

But investors are still spooked, pushing the Topix index down 2.04 percent to 821.84 at lunch. It's slightly better, down 1.84 percent, as the afternoon sets off.

There are negatives across the board in Asia after the test. Stocks in the region had already been shaky over Iraq, with hawks pushing for war and a key United Nations Security Council vote due for mid-March.

Australia's market is off 1.8 percent, with Hong Kong just over 1 percent lower. Singapore and Malaysia are both down by half a percent.

U.S. stocks sold off sharply on Monday, with the Dow Jones industrial average closing down 1.99 percent at 7,858.24 and Nasdaq giving up 1.97 percent to 1,322.38. (U.S. roundup)

Tokyo lower on missile tension

In Tokyo on Tuesday, the Nikkei hit its three-week low after North Korea blasted its antiship missile 60 kilometers (37 miles) into the Sea of Japan.

Japan has not decided whether Kim Jong Il's decision amounts to a national security threat

While the test did not cross into Japanese air space, it was enough to shake off any optimism still lingering over the appointment of a new governor for the central Bank of Japan.

Koizumi said from Seoul that his choice is stable and trusted, with other officials confirming he has selected career central banker Toshihiko Fukui. (Full story)

Millea Holdings, Japan's largest nonlife insurer, is down 4.35 percent at 769,000 yen, with insurance earnings seen as particularly at risk to global events.

Banks, also big holders of equities, are also lower, with Mizuho Holdings down 4.35 percent to 110,000 yen.

The companies are also preparing to close their books on Japan's business year at the end of March, which may see them forced to sell stock to cover losses.

Major exporters are feeling the pressure of possible disruption to world trade. Honda Motor is off 2.05 percent to 4,290 yen, with Toyota Motor 1.74 percent lower to 2,825 yen.

Sony Corp., the world's largest electronics maker, is down 1.31 percent to 4,520 yen.

China Mobile near low in Hong Kong

In Hong Kong, the Hang Seng is down 1.11 percent at 9,137.08, with cell-phone giant China Mobile off 2.25 percent to HK$17.40.

Japanese investors are also processing news they will have a new BOJ chief, Toshihiko Fukui

That brings Hong Kong's second-largest listing to almost a four-year low, on fears over increased competition.

Rival China Unicom is down 3.92 percent to HK$4.90.

The largest listing in the city, bank stock HSBC, is 0.30 percent to HK$83.75 after gains on Monday.

Only retailer Esprit Holdings, up 0.67 percent to HK$15.10, and oil producer CNOOC, ahead 0.48 percent to HK$10.40, are advancing on the 33-stock Hang Seng.

In Australia, the S&P/ASX 200 index is down 1.82 percent to 2,804.0, with most big caps lagging.

The largest stock, media group News Corp., is down 4.1 percent to A$10.49 and No. 2, the telecom Telstra Corp., is off 1.7 percent to A$4.11.

Wine company Southcorp is seeing its stock crushed down 17.0 percent to A$3.66 after reporting disappointing earnings. (Full story)

Qantas Airways is down 3.8 percent to A$3.26 after the airline warned at its last earnings that terrorism fears could cause it to miss its full-year targets.

New Zealand's market closed off 1.71 percent at 1,870.56, with Telecom New Zealand down 3.64 percent to NZ$4.24.

Taiwan's Taiex is off 2.54 percent to 4,492.31, with techs and industrials both lower. Chip foundry TSMC is down 3.97 percent to T$43.50.

With smaller rival UMC, the two companies make up around 12 percent of the Taiwan market. UMC is 3.40 percent to T$19.90.

Screenmaker Au Optronics is also down sharply, off 3.77 percent to T$33.30.

Korea bears brunt of missile test

South Korea's Kospi is down 2.8 percent to 599.06.

Samsung Electronics, the largest listing, is leading the losses. The chipmaker is down 4.68 percent to 295,000 won.

Retailer Shinsegae is also off sharply, down 2.65 percent to 165,000 won, as investors make for the exits.

Singapore's Straits Times index is one of the steadiest in Asia, down just 0.53 percent to 1,299.89. But bank stock DBS Group is continuing to sell despite strong earnings last week.

It is down 2.45 percent to S$9.95. UOB and OCBC are also lower.

Singapore Airlines is off 1.04 percent to S$9.55 on fears that war will disrupt travel.

Malaysia's market is also relatively strong, the Kuala Lumpur composite trading off 0.58 percent to 647.76.

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