Japan down 3% as Asia ends Monday off

Hong Kong bounced back after a 2 percent dip at the open, but Japan's Nikkei sank 3 percent to 10,195.69.

By staff and wire reports

HONG KONG, China -- Japanese stocks closed more than 3 percent lower on Monday, setting a fresh 17-year low.

That dragged most Asian markets down as they started the week, coupled with losses on U.S. markets on Friday.

Hong Kong closed narrowly lower. Stocks in South Korea and Taiwan also slid.

Only Australia broke ranks, as it frequently has. Investors have boosted conservative plays like financial stocks. But the market is still down since the end of June.

Neighboring New Zealand lost almost 1.5 percent, as its largest stock lost ground.

Singapore ended down more than 1 percent, with Indian stocks also down in afternoon trade.

Broad-based losses in Japan

In Tokyo, the benchmark Nikkei ended down 321.10 points or 3.05 percent at 10,195.69, a level not seen since August 1984.

Monday was also the Nikkei's biggest one-day percentage drop since August 9, when it fell 3.36 percent.

Investors were selling traditional manufacturing stocks, as global economic problems expand the glum mood with earnings from technology stocks to the broader market.

The broader Topix index fell 24.85 points or 2.30 percent to 1,055.98.

It does not have such a strong tech component, and is still 7.2 percent above a post-bubble closing low of 980.11 marked in October of 1998 in the aftermath of the Asian financial crisis.

Banks not boosted by merger talk

Asahi Bank led downward charge. Asahi lost 19.25 percent to 130 yen, extending Friday's 14 percent slide.

Investors were shaken by a report questioning its financial health and suggesting it would skip its interim dividend.

It has denied that. But Asahi said on Friday it had proposed forming a joint holding company with Osaka-based Daiwa Bank, another of Japan's most-troubled banks.

Daiwa Bank shed 13.58 percent to 140 yen on Monday. Traders say they want more details.

Major steelmakers fell sharply after slashing their earnings forecast on Friday.

Japan's second-largest steelmaker, NKK Corp., tumbled 7.14 percent to 91 yen. Japan steel No. 3 Kawasaki Steel Corp. lost 6.11 percent to 123 yen.

Telecom companies were also lower. Japan's largest phone company, Nippon Telegraph and Telephone Corp (NTT), fell 3.76 percent to 486,000 yen after touching a nine-year trough of 485,000 yen during the day.

The stock has dropped 46 percent since May 7 because of the weak performance of its overseas peers. It has also come under pressure on fears the government will sell part of its stake in NTT.

Japan's largest cell-phone company, NTT's subsidiary NTT DoCoMo Inc., lost 5.43 percent to 1.22 million yen. It has fallen nearly 60 percent since early May on fears it may have to write down some of its overseas investments.

Sydney benefitting from financials, Qantas

In Australia, the benchmark S&P/ASX 200 finished up 0.26 percent, or 8.3 points, at 3,242.6.

It rallied back from an intraday low of 3,200.5. But Australian stocks have lost nearly seven percent since the end of the financial year on June 30.

Australia's economy is relatively sheltered from the world slowdown. Investors have also been favoring conservative stocks like banks.

National Australia Bank, hit hard last week by a massive writedown on its main U.S. asset, HomeSide Lending, led the major banks higher. It rallied three percent to A$30.20.

Singapore Telecommunications, which has bought Australia telecom No. 2 Cable & Wireless Optus, listed on the Australian exchange at A$1.81, and closed at A$1.82 after touching A$1.88.

SingTel is now listed in Singapore and Australia after a $9 billion takeover of C&W Optus. CWO shares, which will be suspended after the close of trade on Friday, finished down eight cents at A$3.70.

Australia's largest airline, Qantas, soared almost 10 percent to A$3.00 on the possibility that troubled competitor Ansett Australia might be placed in receivership by its owner Air New Zealand.

Air NZ said last week Ansett was losing A$1.3 million ($680,000) a day, before interest and taxes.

In New Zealand, Air New Zealand's B shares, which are open to overseas investors, rose 7 cents to NZ$0.88.

They fell as low as NZ$0.71 on fears problems were worse than imagined at Ansett.

Its board and the New Zealand government are trying to work out how to rescue the airline, and deal with Ansett.

But the benchmark NZSE-40 index fell 1.45 percent to 1,951.81. The largest stock, Telecom New Zealand, fell 1.7 percent to NZ$4.64.

Hong Kong rallies after drop at open

Hong Kong's Hang Seng index closed off just 0.17 percent, or 17.88 points, at 10,366.32.

That was a rebound from Monday morning, when it fell nearly 2 percent at the open to 10,177.51, its lowest level since March 1999.

Hong Kong's stocks are normally closely tied with Wall Street. U.S. stocks fell on Friday, with the Dow Jones industrial average giving up 2.4 percent and Nasdaq falling 1.05 percent.

But the Hang Seng was boosted by investors covering their short selling on Monday. Sentiment is fragile after U.S. unemployment hit a four-year high.

Ailing Internet and telecom play Pacific Century CyberWorks rose again. It was up 3.87 percent to HK$1.88 after a 5.85 percent jump on Friday.

It beat estimates last week with a HK$935 million half-year net profit.

Small-motor maker Johnson Electric Holdings gained 2.4 percent to HK$8.55, off a low of HK$8.10. It gets most of its business from the United States, and has lost 21.6 percent in the past month.

China's biggest cell-phone company continued its fall. China Mobile lost 1.64 percent to HK$21, on worries it is adding less-profitable customers in China.

In Seoul, the benchmark Kospi closed down 0.78 percent at 550.73, off an intraday low of 545.16.

Hynix Semiconductor had its fifth day of gains. It rose 8.5 percent to 1,400 won, on optimism it will land a new financing deal with its creditors.

Hyundai Securities stock closed down 2.2 percent at 8,050 won. Its board accepted a revised deal to sell a third of the company at 7,000 won a share to a team led by American International Group.

Daewoo Motor Sales, the listed subsidiary of bankrupt Daewoo Motor, rose the 15 percent daily limit to 4,270 won, as talks to sell to General Motors near a head.

In Taiwan, the benchmark TAIEX ended down 13.06 points or 0.30 percent at 4,289.10. It rebounded after falling over 2 percent in early trade.

U.S. technology-stock losses hit it hard. But Taiwan's largest listing gave the index a boost, with Taiwan Semiconductor Manufacturing Co. rising 1.6 percent to T$64.

Microchip set designer VIA Technologies closed down the daily limit at T$101, after rival Intel Corp. sued it for patent infringement in the United States.

In Singapore, the Straits Times index was down 1.2 percent at 1,558.45 at the close.

Stocks in India were down 0.13 percent in afternoon trade.

Reuters contributed to this report.