Asian stocks slide led by Tokyo on monetary policy worries

TOKYO (AP) - Asian stocks slid in early Thursday trading as gyrations on the Tokyo market continued, fueled by worries about a surging yen and monetary policies in the US and Japan.

The Nikkei plunged more than 500 points, or nearly 5 per cent to 12,636.51 in early trading. The Hang Seng index fell 2.3 per cent to 20,871.19, while the Kospi in South Korea lost 0.8 per cent to 1,894.96. Benchmarks in Australia, mainland China, Singapore and Taiwan all fell more than 1 per cent.

Japanese media reports said overseas hedge funds may be dumping Japan's equities following a disappointment earlier in the week, when the Bank of Japan didn't take additional easing measures to keep economic revival going.

Adding to the woes was the US dollar's recent fall, trading at about 95 yen on Thursday, in a reversal from 100 yen earlier. A cheap yen is a boon for Japan because it helps the nation's giant exporters by raising their overseas revenue when translated into yen.

Worries linger about the future of the US economy, an important trading partner for Asia.

Overnight on Wall Street, the Dow Jones industrial average fell 0.8 per cent, to close at 14,995.23. The Standard & Poor's 500 index fell 0.8 per cent to 1,612.52.

The Nasdaq composite index fell 1.1 per cent, to 3,400.43.

Japan has been one of the main influences in the markets as investors have scrutinised the authorities' attempts to get the country out of its two-decade stagnation.

In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to 2 per cent. The euphoria that drove the Nikkei up to five-year highs has since dissipated and the index is now around 20 per cent down from its recent peak.

The other major driver in markets has been the uncertainty over the future course of US monetary policy following a solid, if unspectacular, improvement in economic data.

The markets now expect some reduction in the Federal Reserve's monthly asset purchases sometime this year. The stimulus has been one of the main reasons why many assets, such as global stock markets and emerging markets, have bounced back over the past few years.