Nikkei at 7-wk closing low on credit fears,Asia stks

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By Elaine Lies

TOKYO, Nov 5 (Reuters) - The Nikkei average ended at a 7-week closing low on Monday as fears that Citigroup could post large losses on subprime-related investments raised concerns that the credit crunch may be larger than thought, weakening Asian stocks and dragging Tokyo lower. Shares of Citigroup Inc (8710.T: Quote, Profile, Research, Stock Buzz) defied the gloom, though, to rise 5 percent on their first day of trade in Tokyo, which came a day after the head of the giant U.S. bank resigned to take responsibility for spiralling losses on subprime-related investments.

Additional selling pressure came from high-tech shares such as Softbank Corp (9984.T: Quote, Profile, Research, Stock Buzz), which became the biggest drag on the Nikkei 225 after a brokerage lowered its rating on the stock and cut the target price.

"We were in the strange situation where Tokyo shares fell directly on the Citigroup news this morning, then in the afternoon fell on Asian shares falling on Citigroup," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"Basically, this just goes to show how sensitive the market is to negative factors right now."

The benchmark Nikkei average .N225 fell 1.5 percent, or 248.56 points, to 16,268.92 -- its lowest close since Sept. 18.

Market players were also inhibited by domestic political uncertainty after Ichiro Ozawa, head of the largest opposition party, tendered his resignation on Sunday after his Democratic Party rejected an offer from Prime Minister Yasuo Fukuda to join a new coalition and end Japan's policy deadlock. Senior party officials were trying to persuade Ozawa to stay on. [nT304818]

But this was seen as a lesser factor than Citigroup. Charles Prince stepped down after four years as Citigroup's chief on Sunday, as the bank said it may suffer an $11 billion write-down for subprime losses, on top of the $6.5 billion it wrote off three weeks ago. [nN01480369]