asia shares down on us slowdown fears

HONG KONG, Aug 24 (Reuters) - Asian stocks fell on Friday on
concern that problems in the U.S. housing and credit markets
could push the world's biggest economy into recession, while the
yen steadied against the dollar and euro.

The uncertainty helped boost the Japanese government bond
market, with futures edging up following a sharp slide the
previous day, mirroring slight gains in long-term U.S.
Treasuries.

Shares of financial firms and exporters, whose largest market
is the United States, led markets lower from Sydney to Seoul,
putting Asia on track for its first losing session since a major
tumble last Friday.

"Sentiment has improved compared to where it was a week or
two ago but the subprime issue will keep bubbling away under the
surface," said Michael Heffernan, senior client advisor and
strategist at Austock Stockbroking

MSCI's measure of Asia Pacific stocks excluding Japan
<.MIAPJ0000PUS> was down 0.6 percent at 0304 GMT.

The index has rebounded 13 percent since hitting a five-month
trough last Friday and is on track for its biggest weekly gain
this decade. But is still more than 10 percent below its July 24
record high.

Year-to-date, the index is still up more than 14 percent.

Shares on Wall Street fell on Thursday after the head of
Countrywide Financial Corp , the biggest U.S. mortgage
company, said the housing downturn could create a recession.
[ID:nN23251124]

The Dow Jones industrial average <.DJI> ended flat, while the
Standard & Poor's 500 Index <.SPX> slipped 0.11 percent and the
Nasdaq Composite Index <.IXIC> shed 0.43 percent.

Financial stocks were among those leading declines, with the
sector bearing the brunt of dwindling investor confidence in
recent weeks as fallout from the meltdown in subprime mortgages
spread to other corners of the credit market.



SUBPRIME SURFACES IN CHINA

The subprime crisis spilled over into Hong Kong's market
after state-controlled Bank of China <3988.HK>, the country's
fourth-largest lender, revealed late on Thursday that it held
US$8.965 billion in U.S. subprime mortgage-backed bonds and
US$682 million in collateralised debt obligations at the end of
June.

Shares of the bank and subsidiary BOC Hong Kong <2388.HK>
fell on worries the higher-than-expected exposure would weigh on
performance. This contributed to a fall of more than 1 percent
Hong Kong's benchmark Hang Seng Index <.HSI>.

Financials also weighed on Japan's Nikkei average <.N225>,
which fell 0.3 percent from a one-week closing high hit in the
previous session. Exporters and U.S.-exposed firms contributed to
declines in Australian <.AXJO> and South Korean <.KS11> shares.

Bucking the regional trend, China's main stock index <.SSEC>,
which has more than quadrupled since the start of last year, rose
more than 1 percent to a record high. The market was boosted by a
flood of new money from recently established mutual funds and
optimism China's booming economy will fuel corporate profit
growth.

In currency markets, the yen edged lower against the dollar,
but losses were limited by persistent fears that losses linked to
the U.S. subprime mortgage woes could cause more market turmoil.

"Market participants fear nothing has fundamentally changed
in the problem that started from the subprime mortgage woes,"
said a trader at a Japanese bank.

The yen fell in the last two sessions as easing global credit
concerns prompted speculators to dump long yen positions piled up
last week, when unwinding of risky trades financed by borrowing
at low Japanese interest rates boosted the Japanese currency.

The dollar was steady from Thursday's late U.S. trade at
116.39 yen at 0259 GMT. The dollar fell from the previous
day's session high of 117.15 yen but stayed well above a 14-month
low of 111.60 yen struck last Friday.

In energy market,oil prices steadied at below $70 a barrel
after Mexico's state oil firm said Gulf oil rigs suffered only
minor damage from powerful Hurricane Dean and worries over the
subprime mortgage woes in the U.S. weighed.

U.S. light crude for October delivery dipped 5 cents
at $69.78 a barrel by 0232 GMT, after gaining 57 cents on
Thursday, ending a three-day losing streak that had knocked
prices to their lowest since late June.