BANGKOK (AP) — Fears that Europe's debt crisis is morphing from Greece to engulf bigger economies such as Spain and Italy sent Asian stock markets lower Thursday.
Spain's banking system is under strain a week after Bankia, its fourth-largest bank, required $23.8 billion in government aid to cover souring real estate loans.
Investors are increasingly worried that problems might surface at other Spanish banks. Many lent heavily during the nation's real estate bubble and losses from the real estate crash might be too big for Spain's government to shoulder.
"The Spanish banks are in trouble because of real estate loans. And the hole is so big that the Spanish government will find it difficult to save the Spanish banks without blowing a big hole in its budget," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Another negative signal came from the European Central Bank, which said Spaniards pulled billions in deposits out of their banks last month, raising concerns of a larger bank run.
Japan's Nikkei 225 index tumbled 1.4 percent, also hit by a stronger yen which erodes the profits of the country's exporters. Mazda Motor Corp. plunged 4.8 percent and Canon Inc. fell 4 percent. Ricoh Co. Ltd. lost 4 percent.
Hong Kong's Hang Seng lost 1.2 percent to 18,458.67 and South Korea's Kospi was down 1 percent at 1,826.85. Australia's S&P/ASX 200 shed 0.8 percent to 4,060.50. Benchmarks in Singapore, Taiwan, Indonesia and the Philippines also fell.
Spain's woes have magnified fears of a possible debt implosion in Europe's weaker economies — starting with Greece, which will run out of money in the coming days without emergency funding from outside.
Greece's economy is being kept afloat on international loans provided by the European Union and the IMF, along with a harsh austerity package of cuts and higher taxes that is deeply unpopular with the country's electorate. The government that agreed to the loan and austerity package was voted out of office in May.
The new parties, who mainly campaigned on anti-austerity platforms — have not been able to form a government and new elections are scheduled for June 17. One of the most popular parties in Greece, the left-wing Syriza party, wants to abolish Greece's international bailout agreements, raising fears that Greece will leave the Eurozone and destabilize world markets.
On Wednesday, borrowing rates rose sharply for Spain and Italy, a sign that investors are increasingly uneasy about their ability to pay off their debt.
Among stock sectors, energy shares fell on lower oil prices. Japanese energy explorer Inpex fell 2.6 percent. Hong Kong-listed China National Offshore Oil Corp., or CNOOC, lost 1.8 percent.
The Dow Jones industrial average closed down 1.3 percent Wednesday at 12,419.86. The Standard & Poor's 500 index lost 19.10 points to 1,313.32.
The Nasdaq composite index fell 33.63 to 2,837.36. Rising demand for safe investments pushed the yield on the benchmark 10-year Treasury note down to 1.61 percent, apparently the lowest since World War II.
Benchmark oil for July delivery was down 21 cents to $87.61 per barrel in electronic trading on the New York Mercantile Exchange. The contract slid $2.99 to close at $87.82 on the Nymex on Thursday.
On Wednesday, the euro plunged below $1.24 for the first time in nearly two years as traders fretted over Spain's economy. The euro fell to $1.2374 from $1.2382 late in the day in New York. The dollar fell to 78.73 yen from 79.07 yen.
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