HONG KONG - ASIAN stock markets were mostly down on Tuesday, tracking a drop on Wall Street as a tumble in Japanese business confidence and new signs of a China slowdown underlined worries in the region.

Those concerns deepened on news that HSBC, Europe's biggest bank, and other major lenders faced heavy exposure to the alleged US$50 billion (S$74.7 billion) pyramid scheme said to have been run by one of the biggest names in US investing.

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'The tone is reasonably positive but that could change quickly,' said Mr Byron Burke, a broker with ABN Amro Craigs in New Zealand.

While some dealers thought the pre-Christmas lull was kicking in, sentiment was affected by the seemingly endless string of bad news coming out of the United States.

The allegation of a pyramid fraud against Wall Street legend Bernard Madoff took on new dimensions overnight as some of Europe's biggest banks said they had exposure to his firm, which US authorities said would be liquidated.

HSBC said it had exposure of about US$1 billion, while Europe's second-biggest bank Santander said it had a US$3 billion exposure to Madoff Invest Securities.

Fortis Bank Netherlands said it could lose US$1 billion from the alleged scam, even though it had no direct exposure to Madoff's company.

European shares dropped on Monday on the news, with the CAC 40 in France off 0.87 per cent and the Dax in Frankfurt down 0.18 per cent. London's FTSE 100 was flat, off 0.07 per cent.

In the United States, the Dow Jones Industrial Average lost 0.75 per cent while the Nasdaq tumbled 2.1 per cent.

The woes mounted on Monday as Japan's central bank said business confidence had suffered its sharpest drop in three decades.

China, which on Monday announced that industrial output in November rose at its slowest pace in a decade, said Tuesday that urban fixed asset investment also slowed slightly last month.

Meanwhile there has been no firm progress on a possible bailout for the struggling Big Three US automakers - General Motors, Ford and Chrysler. The White House said on Monday it was still studying its options.

Lawmakers have said time is running out for the auto giants, and traded blame with union chiefs over last week's collapse in the Senate of a short-term US$14 billion rescue.

The White House has now said it is ready to consider dipping into a US$700 billion Wall Street bailout agreed earlier this year.

The global financial crisis and the economic slowdown have hit share markets worldwide hard this year, and every major market has suffered big losses.

The Dow Jones is off 35 per cent, Hong Kong's Hang Seng is down 46 per cent and the Nikkei in Tokyo has lost almost 44 per cent since the beginning of the year.

TOKYO
Japanese share prices ended 1.12 per cent lower on Tuesday after Wall Street retreated overnight due to caution over the weak economy and a massive fraud scandal, dealers said.

The Nikkei dropped 96.64 points to 8,568.02. The Topix index of all first section issues lost 18.31 points, or 2.16 per cent, to 828.62.

KUALA LUMPUR
Malaysian shares closed 1.0 per cent higher on Tuesday as a cut in pump price of gasoline and diesel the previous day lent some cheer to the market, dealers said.

The Kuala Lumpur Composite Index gained 8.33 points to close the day at 854.80.

HONG KONG
Hong Kong share prices closed 0.6 per cent higher on Tuesday as investors stayed on the sidelines ahead of an interest rate decision by the US Federal Reserve later in the day, dealers said.

The benchmark Hang Seng Index was 83.26 points up at 15,130.21. Turnover was light at HK$40.32 billion (S$7.62 billion).

SHANGHAI
Chinese shares closed up 0.54 per cent on Tuesday, reversing early losses as auto makers and property developers advanced on hopes of further government support measures, dealers said.

The benchmark Shanghai Composite Index, which covers A and B shares, rose 10.63 points to 1,975.01 on turnover of 52.8 billion yuan (S$11.3 billion).

The Shanghai A-share index added 11.14 points, or 0.54 percent, to 2,074.07 on turnover of 52.7 billion yuan, while the Shenzhen A-share index was up 12.02 points, or 1.94 per cent, to 633.05 on turnover of 26.8 billion yuan. -- AFP, BERNAMA