HONG KONG - ASIAN stocks fell on Monday for the seventh consecutive day, on fears stagflation would hit company earnings and depress consumer spending now that European, Asian and US equity markets are all in bear market territory.

Oil prices slipped under US$145 (S$197.4) a barrel while corn and soybean prices slid, but with regional stocks persistently down more than 20 percent from highs touched late last year - the common definition of a bear market - investors sought safety and stability.

With US aluminium company Alcoa and General Electric kicking off the earnings season this week, worries about falling profits weighed.

'The risk of an earnings recession comes looming into view. We think, therefore, that the bear market still has quite a long way to go to work itself out,' Mr Evans said in a note.

Japan's Nikkei share average was down 0.1 per cent, on track for the 12th day of losses, the longest string of declines since 1954.

Shares in the Asia-Pacific region traded outside of Japan fell 0.2 per cent, according to an MSCI index, and were at their lowest since August 2007 when trouble in the US subprime mortgage market turned into a full-blown credit crisis.

Greater China markets outperformed, with the Shanghai Composite jumping 4 per cent on hopes the index had found a floor after bouncing from near its February 2007 low last week.

Hong Kong's Hang Seng index gained 1.3 per cent, helped by banks such as China Merchants Bank, which forecast on Friday its first-half net profit more than doubled, following a positive earnings comment from Industrial & Commercial Bank of China on Thursday

South Korea's benchmark index fell 0.8 per cent, dragged down by high-profile exporters such as Samsung Electronics and Hyundai Motor

FX intervention futile?
The Korean won rose sharply after finance officials starkly warned of stern measures to boost the currency and try to curb inflation.

That attempt was the latest by policymakers in the region to put a floor under their currencies to relieve upward price pressures that have been plaguing their countries.

However, some analysts believe the toxic combination of feeble growth and high inflation known as stagflation, which is afflicting the region, is too large of a force to beat.

'The best they can hope for, in our view, is to engineer an orderly decline through a smoothing operation. And maybe Vietnam cannot even achieve that,' said Mr Stewart Newnham, currency strategist with Morgan Stanley in Hong Kong.

The US dollar was down 0.6 per cent against the won at 1042.30. The euro fell 0.2 per cent against the dollar to US$1.5662 ahead of two speeches from Federal Reserve Chairman Mr Ben Bernanke, which could reignite expectations for interest rate rises to curb inflation. Against the yen, the dollar was largely unchanged at 106.86 yen

Japanese government bond yields, which move in the opposite direction of prices, fell, adding to losses incurred last week on reduced expectations for near-term interest rate rises.

The 10-year yield fell 1.5 basis points to 1.655 per cent having declined about 25 basis points since mid June when global equity markets tumbled.

Crude prices slipped to US$143.96 a barrel although uncertainty was rife after Iran, the world's fourth largest oil exporter, reasserted its right to pursue uranium enrichment. Last week, oil rose to a record high of US$145.85 and has risen about 50 per cent so far this year.

KUALA LUMPUR
The Kuala Lumpur Composite Index (KLCI) fell 6.91 points, or 0.61 per cent, to 1,127.23, at midday.

HONG KONG
Hong Kong share prices closed sharply higher on Monday, up 2.28 per cent, after the Shanghai bourse surged, dealers said.

The Hang Seng Index closed up 489.24 points at 21,913.06. Turnover remained light at 59.86 billion Hong Kong dollars (S$10.47 billion).

Property firms led the strong showing with Sun Hung Kai jumping 5.24 per cent and Sino Land up 5.88 per cent.

Chinese share prices closed up 4.59 per cent on Monday after strong earnings forecasts from major banks and remarks by government officials on stabilising the market, dealers said.

SHANGHAI
Chinese share prices closed up 4.59 per cent on Monday, after strong earnings forecasts from major banks and remarks by government officials on stabilising the market, dealers said.

Financials rallied after China CITIC Bank projected first-half net profit would rise by more than 150 per cent year-on-year, while China Merchants Bank estimated first-half net profit would be up more than 100 percent year-on-year.

Analysts said strong performances by banks eased investor concern over slowing corporate earnings growth.

Sentiment received another boost after Vice Premier Wang Qishan made remarks at the weekend regarding healthy growth in the financial industry, traders said.

'Investors are regaining confidence because of the authorities' positive remarks about China?s financial market,' Mr Zhou Lin at Huatai Securities told Dow Jones Newswires.

Airliners also turned sharply higher on expectations of strong growth in passenger traffic during the Beijing Olympics in August.

Air China, China Southern Airlines and China Eastern Airlines all rose by the 10 per cent daily limit.

'There're no changes in the fundamentals (of the sector). I guess investors are snapping up airline stocks just because of the Olympics euphoria,' said Mr Ma Ying at Haitong Securities.

The benchmark Shanghai Composite Index, which covers A and B shares, closed up 122.51 points at 2,792.40 on turnover of 82.0 billion yuan (S$16.37 billion)

The Shanghai A-share Index rose 128.67 points, or 4.60 per cent, at 2,928.78 on turnover of 81.8 billion yuan, while the Shenzhen A-share Index was up 42.09 points, or 4.98 per cent, at 887.71 on turnover of 40.5 billion yuan.

TOKYO
The Nikkei stock average rose 0.9 per cent on Monday on a softer yen and gains in other Asian markets, breaking its longest losing streak in more than half a century.

Trend Micro jumped 3.2 per cent on a brokerage upgrade that cited a strong second-quarter outlook of the computer security software maker.

The benchmark Nikkei ended up 122.15 points at 13,360.04, the first gain after 12 days of losses. The broader Topix gained 1.2 per cent to 1,312.80.