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.

'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 share prices ended the morning session down 1.2 per cent on Thursday, on profit-taking after a strong rebound during the last session, dealers said.

The Hang Seng Index ended the morning down 222.69 points at 17,793.82, in a volatile session that saw the index swing in and out of positive territory.

Turnover was light at 35.98 billion Hong Kong dollars (S$6.6 billion).

Hang Seng Bank slumped 9.2 per cent on worries about its exposure to the collapsed US bank Washington Mutual.

TOKYO

Japanese share prices were down 1.11 per cent at the end of morning trade on Thursday on concerns about the global economy despite the US Senate's approval of a bailout for Wall Street, dealers said.

The Tokyo market had opened higher but slipped after the US Senate vote.

Banking shares jumped on the package for the US financial sector, but most stocks suffered from continued concern over the broader economic outlook.

The Tokyo Stock Exchange's benchmark Nikkei-225 index was down 125.61 points at 11,242.65 at the break.

The broader Topix index of all first section shares was down 18.41 points or 1.67 per cent at 1,082.72, slipping below the symbolic 1,100-point level.

The bailout bill next moves to the House of Representatives, where it faces an uncertain future after lawmakers rejected an earlier version on Monday, sparking fresh turmoil on world markets. -- AFP, REUTERS