Associated Press Asia stocks fall amid fears of more economic gloom

Asian stocks tumble after World Bank projects more economic gloom; Tokyo, HK off 3 pct

HONG KONG (AP) -- Asian stock markets tumbled Tuesday, knocked by heavy losses on Wall Street after the World Bank warned of a sharper contraction in the world economy.

Benchmarks in Tokyo, Hong Kong and elsewhere sank around 3 percent in a broad-based rout as the bank's gloomy forecast undermined hopes of a quicker end to the worst recession in decades. Crude oil prices and the dollar also declined.

Global markets have risen massively since March, with some like Hong Kong up nearly 60 percent, on signs the recession is leveling out.

But the World Bank on the weekend issued new and much more pessimistic forecasts. It expects the world economy will shrink by 2.9 percent and warned that a drop in investment in developing countries will increase poverty. The bank's previous forecast was for a 1.7 percent contraction.

With markets already braced for a sell-off following the springtime rally, the report led investors to take profits. The sharp overnight drop on Wall Street was another catalyst, analysts said.

"The markets have been overbought, and now the correction is beginning," said Peter Lai, investment manager at DBS Vickers in Hong Kong. "Investors are facing the reality again. People fear the liquidity and funds will start flowing out of the markets, so we're seeing profit taking."

Japan's Nikkei 225 stock average lost 283.46, or 2.9 percent, to 9,542.81 while Hong Kong's Hang Seng shed 550.13, or 3.1 percent, to 17,505.68.

South Korea's Kospi lost 2.4 percent, Australia's index was off 3 percent and Taiwan's benchmark dropped 1.9 percent. Shanghai's main stock measure traded lower by 1.4 percent.

U.S. investors, also unnerved by the World Bank report, dragged stocks to their largest declines in two months.

The Dow fell 200.72, or 2.4 percent, to 8,339.01, its lowest finish since May 27.

The Standard & Poor's 500 index fell 28.19, or 3.1 percent, to 893.04, also leaving the index with its biggest slide since April 20 and erasing its advance for the year.

Oil prices fell on expectations demand will remain weak. Benchmark crude for August delivery was down $1.04 at $66.80 in Asian trade.

In currencies, the dollar weakened to 95.21 yen from 95.48 yen. The euro was higher at $1.3861 from $1.3844.