By Patrick Rial and Kyung Bok Cho Nov. 11 (Bloomberg) -- Asian stocks dropped on concern the outlook for company earnings is worsening after Citizen Holdings Co. cut its profit forecast, Alumina Ltd. scrapped expansion plans and Australian business confidence fell to a record low. Citizen, the world's largest watchmaker, plunged 9 percent after lowering its annual forecast on slowing sales. Alumina tumbled 12 percent in Sydney. Macquarie Group Ltd. dropped 8.5 percent as slumping sentiment suggested Australia's economy may fall into a recession for the first time since 1991. Stocks pared declines after China's inflation slowed, giving the central bank more leeway to bolster growth in Asia's second-largest economy. ``We're more worried about earnings going forward,'' said Lim Chang Gue, who oversees the equivalent of $1.5 billion at Samsung Investment Trust Management Co. in Seoul. ``If you have a pretty long-term investment horizon then these levels are a buying opportunity. But for the next year, I wonder if the expected returns can justify the risk.'' The MSCI Asia Pacific Index retreated 1.4 percent to 88.95 at 1:50 p.m. in Tokyo. About six stocks fell for every three that rose today and nine of the 10 industry groups dropped, led by materials producers. Shares on the measure trade at 11 times trailing earnings, compared with a peak of 19 times a year ago. The index pared a decline of 3 percent after China's inflation cooled to the slowest pace in 17 months. The Asian gauge has jumped 18 percent from a five-year low on Oct. 27 as central banks globally cut interest rates to ward off a recession, while governments from Japan to South Korea have pushed through spending bills. China on Nov. 9 announced a $586 billion economic stimulus package. U.S. Futures Shares in China gained, led by Baoshan Iron & Steel Co., while futures on the Standard & Poor's 500 Index reversed declines to advance 0.5 percent following the inflation data. Japan's Nikkei 225 Stock Average pared a drop of 4.2 percent, declining 1.1 percent to 8,979.43. Australia's S&P/ASX 200 Index slumped 2.8 percent. Wesfarmers Ltd., the country's No. 2 retailer, decreased 8.3 percent. In New York, the S&P 500 slid 1.3 percent yesterday, led by financial shares, after Barclays PLC said Goldman Sachs Group Inc. may have its first quarterly loss. Citizen lost 9.9 percent to 502 yen in Tokyo. The company slashed its net income forecast for the year ending in March due to a worsening overseas sales outlook for wristwatches and mobile phone components. Alumina, which is partnering with Alcoa Inc., lost 12 percent to A$1.97, set for its lowest close since Oct. 17, after the companies said they have suspended expansion work on the Wagerup refinery due to the global financial crisis. Annual Decline MSCI's Asian index is down 44 percent in 2008 as the credit- market turmoil slows global growth, denting demand for Asian exports. The International Monetary Fund said last week the U.S. Europe and Japan may experience the first simultaneous recession in the post-World War II era. Macquarie dropped 7.4 percent to A$27.62. Australia's business sentiment index slid to minus 29 from September, the lowest level since the series began in 1989, according to a National Australia Bank survey. Wesfarmers declined 8.4 percent to A$21.07, set for its biggest loss since Oct. 16. In Hong Kong, HSBC Holdings Plc declined 1.4 percent to HK$91.00. Europe's largest bank set aside a larger-than-expected $4.3 billion to cover bad loans in the U.S. and forecast ``further deterioration.'' Asciano Group, the Australian coal transporter that rejected a buyout offer from David Bonderman's TPG Capital, plunged 60 percent to 69 cents before trading was halted after Citigroup Inc. said investors should cut their losses and sell. Baoshan, China's largest steelmaker, jumped 6.4 percent to 5.36 yuan. China Construction Bank, the nation's second-largest lender, added 1.4 percent to 4.45 yuan. China's consumer prices rose 4 percent in October from a year earlier, lower than economists had estimated and less than half the 12-year high reached in February. The central bank may keep lowering borrowing costs after three reductions in the past two months, Governor Zhou Xiaochuan said Nov. 9 in Sao Paulo. To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net.

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