Asia: Markets track US losses on Deutsch Bank worries

[HONG KONG] Asian markets tumbled on Friday, tracking a sell-off in New York as worries about the future of German banking giant Deutsche Bank hammered financial stocks.

A report that several hedge funds had withdrawn their investments in the lender over worries about its viability after US authorities slapped it with a US$14 billion penalty over its sale of mortgage-backed securities prior to the 2008 financial crisis.

There are fears the fine could batter the already fragile firm, fuelling talk that it would become another Lehman Brothers, the Wall Street titan whose downfall precipitated the global downturn six years ago.

Deutsche Bank plunged almost seven per cent in New York and the losses were reflected in Asia, with Japan's Mitsubishi UFJ Financial Group diving more than two per cent and HSBC down almost one per cent in Hong Kong. Sydney-listed Commonwealth Bank sank one per cent, as did Westpac.

"Deutsche certainly weighs on sentiment, and the declines are concerning," James Woods, a strategist at Rivkin Securities in Sydney, told Bloomberg News.

"Being named the number one bank for global systemic risk, it's entwined with everyone."

The sell-off dragged broader markets down, a day after an oil-fuelled rally following Opec's surprise announcement that it would cut production.

Tokyo ended the morning down 1.6 per cent, while Hong Kong was 1.2 per cent off, Sydney fell 0.8 per cent and Seoul lost 0.8 per cent. Singapore tumbled more than one per cent and there where sharp losses in Wellington, Taipei and Manila.

However, Shanghai rose 0.2 per cent ahead of a week-long national holiday.

The losses followed falls on Wall Street, where traders ran for cover as they brushed off data showing US second-quarter economic growth figures beat forecasts.

The unease spread into currency markets, with high-yielding - riskier - units fell against the dollar as dealers looked for safety.

South Korea's won fell 0.5 per cent, the Indonesian rupiah lost 0.2 per cent and the Australian dollar slipped 0.4 per cent.

The greenback, however, sank to 100.95 yen from 101.04 yen in New York and well off the levels above 101.50 yen seen earlier Thursday in Asia.

On oil markets both main contracts fell as the euphoria over Wednesday's shock agreement by Opec to reduce production faded.

West Texas Intermediate dipped 0.3 per cent and Brent was off 0.4 per cent.

AFP