By Patrick Rial and Ian Sayson Oct. 15 (Bloomberg) -- Asian stocks declined, a day after the region's benchmark index rallied the most in a decade, as concern earnings will deteriorate overshadowed a $2 trillion global bank rescue. Posco, Asia's third-largest steelmaker, plunged 8.8 percent in Seoul after saying demand will fall this quarter, while BHP Billiton Ltd. lost almost 3.4 percent as oil dropped. Kawasaki Kisen Kaisha Ltd., Japan's third-biggest shipping line operator by sales, tumbled 8.6 percent after marine transport rates slumped to a three-year low. China Construction Bank Corp. fell 5.1 percent in Hong Kong after Citigroup Inc. said Chinese lenders' profits may decline in 2009 as bad loans rise. ``Markets are still on a downward phase,'' Masahiko Ejiri, who helps manage about $30 billion at Mizuho Asset Management Co., said in Tokyo. ``Many are anticipating weaknesses in economies. We have to have some kind of evidence that the financial rescue plan is working.'' The MSCI Asia Pacific Index declined 1.8 percent to 94.84 as of 1:05 p.m. in Tokyo, led by producers of commodities and consumer discretionary goods. Almost three stocks fell for each that rose on the measure, which has lost 40 percent this year on concern frozen credit markets will trigger a global recession. Japan's Nikkei 225 Stock Average slid 1.2 percent to 9,337.19, led by Dowa Holdings Co. after the smelter cut its profit forecast. Hong Kong's Hang Seng Index dropped 2.2 percent. All other benchmark indexes in the region fell apart from Vietnam. Shares on MSCI's Asia gauge traded at less than 10 times reported earnings at the end of last week, the cheapest since Bloomberg began tracking the data in 1995. They currently trade at 10.6 times. In contrast, stocks on the Standard & Poor's 500 Index were valued at 17 times profit yesterday. Steel Demand S&P futures slid 0.5 percent. The index fell 0.5 percent to 998.01 yesterday, after gaining the most since the 1930s the previous day. Posco slumped 8.8 percent to 353,500 won, as investors shrugged off a 40 percent gain in third-quarter profit. The last three months of the year will be ``very difficult,'' Chief Financial Officer Lee Dong Hee said yesterday. JPMorgan Chase & Co. cut its recommendation on the stock to ``neutral'' from ``overweight,'' citing the weakening outlook for demand. Nippon Steel Corp., the world's second-largest mill, lost 10 percent to 328 yen in Tokyo. JFE Holdings Inc., the second biggest in Japan, retreated 6.6 percent to 2,355 yen. Nouriel Roubini, the New York University professor of economics who predicted the current crisis in 2006, said yesterday the U.S. will suffer its worst recession in 40 years as home prices continue to plunge and the unemployment rate rises to 9 percent. Oil Drops BHP, Australia's largest oil producer, slipped 3.4 percent, to A$29.95. Woodside Petroleum Ltd., the second biggest, dropped 2.6 percent to A$39.39. Dowa, Japan's second-largest smelter and a metals recycler, plunged 13 percent to 342 yen after lowering its profit forecast on slumping demand. Credit Suisse Group cut the stock's rating. Crude oil lost 3.2 percent to $78.63 a barrel yesterday in New York amid skepticism that plans for rescuing banks will be enough to boost economic growth and fuel demand. The contract fell to $78.02 in after-hours trading. A U.S. proposal to inject $250 billion into financial institutions followed an announcement that France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders. Shipping Outlook Shipping companies plunged throughout the region as freight rates slumped. The Baltic Dry Index, a measure of commodity- shipping costs, lost 8.5 percent yesterday, a seventh consecutive drop and the lowest level since August 2005. Kawasaki Kisen tumbled 8.6 percent to 455 yen after UBS AG cut its earnings forecast for the bulk transporter. Hanjin Shipping Co., South Korea's biggest shipping line, declined 4.4 percent to 23,100 won. Cosco Corp. Singapore Ltd., the shipbuilding and repair unit of China's biggest shipping company, fell by a record 20 percent to 80 cents. Citigroup Inc. cut its ratings on Cosco to ``hold'' from ``buy,'' saying the credit crisis will hurt project financing. ``This isn't a situation where we can be at all optimistic about the world economy,'' said Hisakazu Amano, head of fund management at T&D Asset Management Co., which oversees the equivalent of $39 billion in Tokyo. Yamaha, Mazda Yamaha Motor Co. slumped 10 percent to 1,111 yen. The world's second-largest motorcycle maker will halt production at its plant in Manaus, Brazil, for 10 days as the global credit crisis crimps demand, while Nikko Citigroup Ltd. lowered the shares to ``sell,'' citing the stronger yen and outlook for falling sales. Mazda Motor Corp., a third owned by Ford Motor Co., plunged 9.6 percent to 284 yen after the Nikkei newspaper said the company has suspended plans to build a factory in conjunction with the U.S. automaker. China Construction Bank, the nation's second-biggest lender, fell 4.6 percent to HK$4.15. Industrial and Commercial Bank of China Ltd., which more than doubled its profit since 2005, lost 2 percent to HK$4.32. Bank of Communications Ltd., China's fifth largest, slumped 4.2 percent to HK$6.18. Citigroup analyst Simon Ho and Franco Lam cut their earnings estimates for domestic banks by an average 20 percent for 2009 and 26 percent for 2010. The non-performing loan ratio of the nation's six largest publicly traded banks is likely to rise to 3 percent, they said in a note. Bank of East Asia Ltd., which became the first Hong Kong bank to have a run on it in more than a decade, jumped 3.6 percent to HK$22.90 after the city's government said yesterday it will guarantee bank deposits. Telecom Corp., New Zealand's largest telephone company, dropped 5.8 percent to NZ$2.43 after cutting its earnings forecast as much as 8 percent due to capital spending costs. To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.

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