HONG KONG - ASIAN stocks fell and safe haven assets such as government debt gained after the US Senate's approval of a massive bank bailout plan failed to dispel the deepening worries about the global economy.

Doubts about whether the US House of Representatives will now approve the revised US$700 billion (S$1 trillion) rescue plan for the financial system also weighed, after their unexpected rejection of an initial package on Monday sent global markets reeling.

However, the dollar remained better bid against other major currencies after the financial crisis this week started taking a bigger toll on European banks and worldwide growth.

Investors are bracing for comments on the financial crisis from the European Central Bank, which meets later in the day amid expectations it will keep interest rates on hold.

'This is clearly positive news but there's still the lower house vote, so there is little room for optimism.'

'Even if the bill is passed, worries remain over the global economic outlook so financial markets are unlikely to stabilise,' said Masamichi Adachi, a senior economist at JPMorgan Securities in Japan.

'It's a completely different world now. All the things US authorities are doing now are simply aimed at preventing a global meltdown. They might trigger a short rally in markets but won't offer a fundamental solution,' he said.

The MSCI index of Asia-Pacific stocks outside Japan fell 0.7 per cent, erasing a modest gain immediately before the US Senate vote, while Tokyo's Nikkei average fell 1.1 per cent.

South Korean stocks were among the biggest decliners with a 1.4 per cent fall, while other markets such as Australia , Hong Kong and Taiwan fell less than 1 per cent each.

Steep stock slide
Asian stocks have fallen in each of the previous five months, culminating in a 17 per cent drop in September that marked the biggest monthly decline since the financial crisis a decade ago.

The inability to gain traction on Thursday came even after the US Senate voted 74 to 25 in favour of a revised bailout package aimed at reinvigorating frozen worldwide credit markets and interbank lending.

The US House of Representatives is expected to vote on the bill on Friday and, if approved, it would go to the White House for signature into law by U.S. President George W. Bush.

Given the uncertainties, investors preferred to play it safe.

The US Treasury 10-year note erased earlier losses to edge up, sending yields down to 3.73 per cent, compared to 3.74 per cent late in U.S. trade on Wednesday.

Gold also advanced, trading at US$872.30 an ounce, up from a notional close of US$868.75 on Wednesday.

Continued signs of weakness in the US economy - including data on Wednesday showing US factory activity shrank in September to its lowest since the 2001 recession - bode ill for a global economy that depends in good measure to the largesse of the US consumer.

'Market expectations for Asian growth was a bit too strong at the start of the year. Asian currencies will weaken against the dollar,' said Economist Kit Wei Zheng, from Citigroup in Singapore.

'The weakness in the rest of the world has not been priced in and currencies will move to reflect that in the coming months. It will be a story of the rest of the world weakening rather than a rebound in the US dollar.'

Dollar firm
The dollar index, a gauge of performance against six major currencies, rose 0.1 per cent to 79.783. That was near a one-year peak struck last month but off a high of 80.025 hit before the Senate vote.

The euro dipped 0.3 per cent to US$1.3975 and was near a one-year low of US$1.3882 struck last month, amid expectations the European Central Bank still has room to cut rates at some point, which would erode the euro's yield advantage over the dollar.

Europe is becoming a point of focus for global investors as the credit crisis hits European financial institutions such as Fortis, which was rescued by a £11 billion bailout on Sunday.

Oil was up 74 cents at US$99.27, down from earlier gains to as much as US$100.37 as concerns remained over weakening demand and growing supplies in the United States.

Markets in China, Malaysia and Indonesia were closed on Thursday due to national holidays.

SINGAPORE
Singapore shares ended the morning session lower with the benchmark Straits Times Index (STI) down 19.81 points, or 0.84 per cent, at 2,339.10.

Up to 647 million shares exchanged hands.

Losers beat gainers 202 to 180.

HONG KONG
Hong Kong shares closed 1.1 per cent higher on Thursday, boosted by a strong rally in Ping An Insurance after it ended a plan to buy half of Fortis' asset management arm, dealers said.

The benchmark Hang Seng Index finished up 194.9 points at 18,211.11.

Turnover was HK$69.66 billion (S$12.87 billion).

Pin An surged 13.77 per cent after confirming that it had terminated its deal with Fortis, the embattled financial group partially nationalised by Belgian, Dutch and Luxembourg governments.

TOKYO
Japanese share prices closed down 1.88 per cent on Thursday, hitting a three-year low on worries about the financial crisis, despite the US Senate's approval of a bailout for Wall Street.

The Tokyo Stock Exchange's benchmark Nikkei-225 index lost 213.50 points to end at 11,154.76, the lowest point since May 2005.

Investors were waiting to see whether the revamped US$700 billion (S$1 trillion) rescue plan will now clear the House of Representatives, which rejected an earlier version on Monday, sparking renewed turmoil on world markets. -- AFP, REUTERS