Asian stocks dropped for the first time since Monday, with financial stocks and property developers leading the way down as worries continued about the extent of losses in US credit markets.

A rally in gold prices stalled at $883.54, short of the lifetime record of $891.70 reached briefly on Wednesday. Gold was trading at around $879 by lunchtime in Hong Kong.

The MSCI Asia Pacific Index fell 0.5 per cent to 154.16 by midday, after rising by 1.3 per cent over the past two days.

Japanese stocks fell in morning trading, led by real estate issues, after a report by Credit Suisse suggested overseas investors may start selling their Japanese property holdings to offset losses elsewhere caused by US subprime turmoil.

The Nikkei 225 closed morning trading down almost 1 per cent at 14,470.69. The real estate index led the broader Topix index down, slumping 3.2 per cent to 1,409.38.

Real estate companies weren't the only ones affected by concerns over the US subprime problem. Automakers fell over persistent concerns over the health of the US economy. Toyota Motor (NYSE:TM), the world's largest automaker by market capitalisation, dropped 1.9 per cent to Y5,700 in morning trading while Nissan Motor (NASDAQ:NSANY) fell 3 per cent to Y1,097 and Honda Motor (NYSE:HMC) slid 2 per cent to Y3,410.

In Hong Kong, the Hang Seng index ended the morning 1.1 per cent lower at 27,305.69. Big losers included Cheung Kong, the property developer, which dropped 3.2 per cent to HK$141.40 after announcing a $604m share sale, and HSBC, which makes a big proportion of its profits in North America and slid 0.9 per cent to HK$126.70.

In Australia, the S&P/ASX 200 index fell for the fourth day, dropping 0.4 per cent to 6,060.80 in early afternoon trading. Shopping mall owner Centro dropped 26 per cent to 85 Australian cents before recovering to 89.5 cents. Centro put itself up for sale after failing to refinance billions of dollars of debt, and the Australian newspaper said regulators questioned the company Wednesday about accounting for its debt. Centro shares have lost more than 90 per cent of their value since the middle of last year.

Banks suffered after Morgan Stanley cut its rating for Commonwealth Bank of Australia to "equal weight" from "overweight". CBA shares dropped as much as 0.8 per cent to A$56.38. National Australia Bank (NYSE:NAU) lost 0.9 per cent to A$35.27 and Westpac Banking (NYSE:WBK) slid by 0.7 per cent to A$26.76.

Singapore shares lost ground on the first day of the relaunched and recalculated Straits Times index. Early in the afternoon session, it was 0.2 per cent lower at 3,339.

One of the newcomers to the revised index, Wilmar International, the world's biggest palm oil trader, gained 1.8 per cent to S$5.70.

The new index is the result of a collaboration between the FTSE Group, which is 50 per cent owned by the Financial Times, the SGX and Singapore Press Holdings, publisher of the Straits Times newspaper, which created the original STI in 1970.