Associated Press 11.28.06, 6:24 AM ET

Asian markets fell Tuesday, following Wall Street's worst day in more than four months, as Hong Kong shares tumbled 2.9 percent in the biggest single-day drop in five years and as Japanese stocks slipped.

Hong Kong's Hang Seng Index dived 564.48 points, or 2.9 percent, to 18,639.53. The decline was the steepest since the index plummeted 923.74 points, or 8.9 percent, to 9,493.62 points on September 12, 2001.

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"All of November's gains have been wiped out in one session," said Andrew Clarke, a trader at SG Securities. "But I don't think it is a major disaster. I think it is one of those things when everything comes at once."

The selling was a combination of hedge funds booking profits at the end of November to switch into Japan, along with fears that guidance from retail giant Wal-Mart signaled a a slowdown in U.S. growth, added Clarke.

But investment professionals said the market's bull run, which began in 2003, was unlikely to end. The index would likely rebound in the near term, they said.

The index had risen about 27 percent from a mid-June low of 15,200 to a recent record high of 19,404.01 points.

"Hong Kong has been overbought for some time so the time is ripe for some consolidation," said Francis Lun, general manager of Fulbright Securities.

In Tokyo, the benchmark Nikkei 225 stock index lost 30.12 points, or 0.19 percent, closing at 15,855.26 points.

The market recovered in afternoon trading after opening sharply lower following the drop overnight in the U.S. market, where the Dow Jones industrial average lost 158.46, or 1.29 percent, to 12,121.71. It was the Dow's biggest slide since mid-July.

The U.S. retreat hurt export-oriented shares in Tokyo, including electronics makers and automakers.

Meanwhile, Japanese Finance Minister Koji Omi said the government plans to cut bond issues for the next fiscal year starting April as the country's economic recovery would likely boost tax revenues.

That raised bond prices. The benchmark 10-year bond rose to 101.30 from 101.18, sending the yield on the 10-year government bond to 1.6450 percent from Monday's finish of 1.6600 percent.

Japan has struggled with high government debt, and the government of new Prime Minister Shinzo Abe has pledged to rein in spending.

In currencies, the dollar bought 116.10 yen on the Tokyo foreign exchange market late Tuesday, up from 116.08 yen late Monday in New York. The euro rose to US$1.3142 from US$1.3128.

Elsewhere:

BANGKOK: Thai shares ended down, tracking weakness in regional bourses, overnight fall on Wall Street. The Stock Exchange of Thailand's SET index fell 1 percent at 727.33.

JAKARTA: Indonesia shares closed 2.2 percent lower at 1,691.08, hurt by a decline in the local currency and declines across Asian markets after stocks in the U.S. tumbled overnight.

MANILA: Philippine stocks fell on heavy volume, in step with Wall Street's overnight decline. The benchmark 30-company Philippine Stock Exchange Index lost 38.42 points, or 1.4 percent, at 2,779.14 points, after being little changed Monday.

SEOUL: South Korean shares lost ground after a sharp fall in U.S. markets overnight, with airline and technology issues among the major decliners. The Korea Composite Stock Price Index, or Kospi, fell 1 percent, or 13.66 points, to 1,411.47.

SHANGHAI: Chinese stocks fell as investors sold large-capitalized shares following recent gains. The benchmark Shanghai Composite Index declined for the third straight session, dropping 0.4 percent to 2,038.72.

SINGAPORE: Singaporean shares ended lower, but traders said the index will likely move upwards in the traditionally strong year-end season. The Straits Times Index fell 41.62 points, or 1.5 percent, to close at 2,799.32.

SYDNEY: Australian stocks fell sharply in the wake of declines on Wall Street, with banking and resource shares dragging down the market. The benchmark S&P/ASX200 index fell 67.9 points, or 1.25 percent, to 5,384.3, while the All Ordinaries index lost 64.7 points to 5,367.8.

TAIPEI: Taiwan's shares snapped a winning streak, falling slightly after Wall Street's overnight slide. The Weighted Price Index of the Taiwan Stock Exchange dropped 53.21 points, or 0.7 percent, to 7,444.94.

WELLINGTON: New Zealand's stocks were almost unchanged as declines in stocks listed in both Australia and New Zealand offset a muted rally by bellwether Telecom Corp. on a better-than-expected regulatory outcome. The benchmark NZX-50 closed up 0.9 of a point at 3,832.55.

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