Asia Falls on Bernanke

By SHRI NAVARATNAM

SINGAPORE -- Asian shares were lower Thursday as investors were spooked by Federal Reserve Chairman Ben Bernanke's downbeat assessment of the U.S. economic outlook. Exporters' stocks in Tokyo were hit by a stronger yen as investors bought into the safe-haven Japanese currency.

Wall Street tumbled on Wednesday after Mr. Bernanke--in testimony to Congress--called the economic outlook "unusually uncertain" but indicated that no moves to bolster the recovery were imminent.

"It is pretty obvious looking at the way markets have been trading of late that there is a lot of uncertainty over the growth outlook. But for the Fed Chairman to admit it in such a direct manner does not exactly inspire confidence among investors," said Khoon Goh, senior economist at ANZ bank in Wellington. "It is clear that the Fed will not only continue to stay on hold for a long time, but there is a chance that the Fed may have to do more to provide support to the economy."

Japan's Nikkei Stock Average was 0.4% lower, South Korea's Kospi Composite was down 0.1%, Australia's S&P/ASX 200 fell 0.2% and New Zealand's NZX-50 was 0.4% lower. Dow Jones Industrial Average futures were up three points in screen trade.

The Tokyo marked struggled amid the generally weak sentiment, while the yen's strength against the U.S. dollar and the euro hurt exporters' stocks.

Tech plays were down, with Sony off 1.2%, Canon off 1.8%, Sharp down 2.3% and Toshiba down 0.9%. Auto makers were also falling, led by Nissan Motor's 0.7% drop and Honda Motor's 0.6% drop.

Shionogi & Co bucked the market, rising 3.8% after saying on Wednesday it and GlaxoSmithKline will start a phase-three clinical study on an HIV infection treatment following favorable results from phase-two trials.

Shares in Australia were trading lower as investors took a dim view of Bernanke's cautious comments. However, losses were contained by gains in resources stocks after Wednesday's strength in base metal prices.

"I think the Australian share market is going to remain quiet, running into reporting season," said UBS Head of Sales, George Kanaan. "Resources were strong in Europe and that's neutralizing the negative impact of Bernanke's comments overnight. There's nothing negative coming out of China and I think the European bank stress tests won't be an issue."

BHP Billiton rose 0.8% and Rio Tinto added 0.9%. Among financials, major banks were down 0.5%-1.1%, while QBE Insurance lost 1.0% and Westfield was down 1.0%.

Other heavyweight losers included Woolworths, down 0.8%, and Amcor, off 1.3%.

The Korean market was hobbled by the weak Wall Street lead.

Hynix Semiconductor was choppy, down 0.2%, even though it reported before the market opened that it had swung sharply to a second-quarter net profit from a year earlier loss, bolstered by strong chip prices and corporate demand for personal computers and hand-held devices.

Samsung Electronics was off 0.5% and LG Display gave up 0.6%. Auto makers were mixed, with Hyundai Motors down 0.5%, while Kia Motors tacked on 0.7%. Korea Electric Power Corp. was flat ahead of its earnings report later in the day.

New Zealand shares were drifting lower in quiet trade. Most of the large stocks were weak, with Fletcher Building giving up 0.5% and Telecom falling 0.5%.

Chip maker Rakon was flat despite news it is expanding its European business and buying the assets of French-based competitor Temex for EUR400,000. The company said the deal will "provide significant acceleration for Rakon's growth." First NZ Capital broker Philip Hunter said: "The market needs time to digest it but it looks like a positive step on the face of it."

In foreign exchange markets, the euro remained under pressure against the U.S. dollar and yen after dropping sharply on Wednesday following Bernanke's cautious note on the U.S. economy.

Minoru Shioiri, senior foreign exchange dealer at Mitsubishi UFJ Morgan Stanley Securities, said the "momentum is to the downside" for the euro. He said the results of the European banks' stress tests due on Friday may also weigh on the single currency as "some participants have become more nervous about the results compared to at the start of the week."

The euro was fetching $1.2751, from $1.2763 late Wednesday in New York, and was at 110.53 against the yen, from 111.09 yen. The dollar was buying 86.68 yen, compared with 87.01 yen.

Japanese government bonds were higher as investors shifted into safe-haven government paper amid losses in stock markets. The lead September JGB contract was up 0.15 at 141.85 points while the yield on the 10-year cash JGB was down 1.0 basis point at 1.075%.

Spot gold was at $1,185.80 per troy ounce, down 30 cents from late New York trade Wednesday. Nymex September crude oil futures were down 12 cents at $76.44 per barrel on Globex.

Write to Shri Navaratnam at shri.navaratnam@dowjones.com