HONG KONG, May 23, 2011 (AFP) - Asian stocks fell sharply on Monday as traders were spooked by a downgrade of Greece's credit rating and fears over how the eurozone can dig itself out of its debt hole.
Sentiment was also hurt by preliminary data suggesting a slowdown in the Chinese economy, with the HSBC Purchasing Manager's Index at a 10-month low in May.
Ratings company Fitch on Friday slashed Greece's rating by three notches to B+, citing its growing problems in getting its public finances in order.
Fitch said the move reflected the "scale of the challenge facing Greece in implementing a radical fiscal and structural reform programme necessary to secure solvency of the state and the foundations for sustained economic recovery."
Tokyo shed 1.52 percent, or 146.45 points, to end at 9,460.03 and Sydney lost 1.88 percent, or 89.2 points, to hit 4,643 while Seoul closed down 2.64 percent, or 55.79 points, at 2,055.71.
Hong Kong fell 1.78 percent and Shanghai was 2.20 percent down in the afternoon.
Among the biggest losers in Tokyo trade was beleaguered utility Tokyo Electric Power, which fell 8.99 percent after the company posted the biggest ever loss for a Japanese non-financial firm.
TEPCO said it had lost a record $15 billion in the financial year ended March and its under-fire president resigned to take responsibility for the worst nuclear crisis since the Chernobyl disaster 25 years ago.
Shares in the utility fell to 334 yen, down nearly 85 percent since the day before the March 11 earthquake and tsunami crippled cooling systems at the Fukushima Daiichi nuclear plant, triggering reactor meltdowns.
Lingering uncertainty over the direction of the company, amid fears over the size of compensation liabilities was hitting the shares.
"The government looks unlikely to reach a consensus on its financial support plan for TEPCO anytime soon, and that will weigh heavily on the stock," said Hideyuki Ishiguro, an investment strategist at Okasan Securities.
Machinery stocks also suffered following a Nomura Equity Research report Friday that projected a fall in demand for construction machinery in China.
"We now expect sales volume of hydraulic excavators in China (produced by overseas manufacturers) to fall 20 percent year-on-year in the fiscal year ending March 2012, versus our prior assumption of a 10 percent rise," Ishiguro said.
Komatsu lost 5.9 percent.
Hong Kong and Shanghai shares were sold amid concerns over a slowdown on the mainland after early data from HSBC suggested manufacturing had slowed in May
The banking giant said the preliminary purchasing managers index for May fell to a 10-month low of 51.1, from April's 51.8. Although a reading above 50 indicates expansion and below 50 suggests contraction, the figures point to an easing in the world's biggest economy.
However, in Hong Kong second-hand luxury handbag retailer Milan Station surged 77 percent at one point on its market debut.
The firm was more the 2,100 times oversubscribed in its initial public offering, a record for the city.
On forex markets the euro fell to $1.4078 in Tokyo afternoon trading from 1.4155 in New York late Friday. The single European currency fetched 115.36 yen, down from 115.66.
The dollar rose to 81.94 yen from 81.70 yen.
"The euro is likely to search for the bottom this week as Greek debt woes appear to be spreading to other countries," Yoshio Yoshida, a trader at Mizuho Trust and Banking, told Dow Jones Newswires.
The euro dropped to an all-time low of 1.2348 Swiss francs in early trade before pulling back to 1.2379, against 1.2417 late Friday.
Fitch's assessment Friday of Greece's situation, did, however provide a glimmer of hope for bond holders, with the agency saying it expects substantial new money will be provided to Greece by the EU and IMF, and therefore "Greek sovereign bonds will not be subject to a 'soft restructuring' or 're-profiling' that would trigger a 'credit event' and default rating".
US stocks began the fall on Friday after the Greek downgrade.
The Dow Jones Industrial Average slid 0.74 percent to end the day at 12,512.04.
Oil was down in Asia as investor sentiment took a hit partly from worries over weak US demand, analysts said.
New York's main contract, light sweet crude for July delivery, lost $1.47 to $98.63 a barrel, while Brent North Sea crude for July dipped $1.34 to $111.05 in the afternoon.
"Crude oil prices were weaker as US economic recovery is sputtering and fuel demand may drop," said Ker Chung Yang, commodity analyst from Phillip Futures in Singapore.
Gold opened in Hong Kong at $1,511.00-$1,512.00 per ounce, up from Friday's close of $1,503.00-$1,504.00.
In other markets:
-- Taipei fell 1.01 percent, or 89.52 points, to 8,747.51.
Hon Hai Precision, the parent of technology giant Foxconn, lost 2.91 percent to Tw$100.0 on concerns over the possible impact on its manufacturing of Apple's iPad 2 after a deadly blast at a factory in China.
Leading IC design house MediaTek was 2.52 percent lower at Tw$310.0
-- Manila closed 0.51 percent, or 21.97 points, lower at 4,263.19.
Megaworld ended down 3.9 percent at 1.98 pesos, San Miguel was unchanged at 109.50 pesos and Metropolitan Bank closed 0.1 percent lower at 72.40.
Trading was extended by more than an hour because of a technical glitch.
-- Wellington closed 0.66 percent, or 23.31 points, lower at 3,554.13.