Asia stocks continue to slide

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HONG KONG, China (Reuters) -- Asian stocks extended losses on Thursday despite a recovery on Wall Street from a global sell-off that saw many markets suffer their worst one-day drops since the Sept. 11, 2001 attacks, with investors not ready to shed their newfound aversion to risk.

"The U.S. rally wasn't convincing so there is still some nervousness, and with profit taking and risk-aversion yesterday, people are probably sitting on the sidelines today," said Hans Kunnen, head of investment market research at Colonial First State in Sydney.

MSCI's index of Asian stocks outside Japan was down 0.78 percent on Thursday after reaching a record high on Tuesday.

Japan's Nikkei average ended 0.86 percent lower after losing 2.9 percent on Wednesday in its biggest daily decline in eight months, with worries about the possibility of a U.S. recession battering exporters and manufacturers such as Toyota Motor Corp. and Kyocera Corp.

Stocks in Australia and Hong Kong fell, with Chinese shares listed in Hong Kong down 2.52 percent.

The Shanghai index, which helped trigger the global slide with a nearly 9 percent drop on Tuesday, lost nearly 3 percent after recovering by almost 4 percent on Wednesday, despite a gain of as much as 51 percent by Ping An Insurance in its $5 billion IPO debut.

Indian shares were flat after an early rise, while Singapore stocks booked early gains before dipping into negative territory.

The Taiwan stock market, which was closed on Wednesday and missed the global sell-off, lost 2.83 percent, while Seoul was closed for a holiday.

"Wall Street bounced back, but not as much as investors had hoped," said Renji Motohashi, general manager of the equity department at Shinko Securities in Tokyo.

Wall Street fails to inspire

U.S. stocks rebounded on Wednesday, but shares in Europe racked up another losing session. Wall Street's volatile recovery was solidified after Bernanke told Congress there did not appear to be a single trigger for this week's global stock slump.

The Dow Jones industrial average closed 0.43 percent higher, while the Standard & Poor's 500 Index gained 0.56 percent and the Nasdaq advanced 0.34 percent.

Credit markets in Asia jumped both on a technical rebound and support from higher emerging debt markets elsewhere.

Overnight in New York, spreads on emerging market debt tightened on Bernanke's positive view of the U.S. economy with yield spreads tightening 12 basis points to 182 bps above U.S. Treasuries, according to the benchmark JP Morgan's EMBI+ index.

"We are at or better than levels we were two days ago. Yesterday, the bids did pull back initially but offers never lowered, so it was hard to find trade going on. Today it is more active," said a Hong Kong based trader.

"There is good technical support but we expect to see more volatility originating from the stock markets," he added.

Asian stocks listed on Wall Street rose 0.84 percent overnight, a day after posting their worst one-day drop in nearly three years.

"While increased risk aversion may still have some room to go, we think the correction is unlikely to turn into a serious meltdown," Citigroup wrote in a research note.

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