BLBG: Most Asian Stocks Decline on Recession Concern; Elpida Climbs
Most Asian stocks fell, with the benchmark index set for a record annual decline, on concern the deepening global recession will hurt profits. Commodity producers rose as oil and metals prices advanced.
Samsung Electronics Co., the world’s biggest computer- memory chipmaker, lost 2.4 percent in Seoul as an index of South Korean consumer confidence slumped. Mitsubishi Paper Mills Ltd. sank 5.8 percent in Tokyo on concern fuel costs will increase. Mitsui Sumitomo Insurance Group Holdings Inc. and Elpida Memory Inc. climbed at least 6 percent on merger speculation.
“The economic slump is turning out worse than the last recession of 2001 and 2002,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages about $53 billion. “Many companies could be forced to merge in order to survive.”
Five stocks fell on the MSCI Asia Pacific Index for every three that rose, with the gauge adding 0.2 percent to 87.54 as of 2 p.m. in Tokyo. The global financial crisis has dragged the measure down by 45 percent this year, putting it on course for the worst annual performance in its two-decade history.
Japan’s Nikkei 225 Stock Average lost 0.7 percent, while benchmark indexes in South Korea and China dropped more than 1 percent. Markets in Indonesia, Malaysia, and the Philippines are closed for holidays.
Hynix Semiconductor Inc. dropped 4.6 percent after Standard & Poor’s cut its credit rating. Henderson Land Development Co. led Hong Kong real-estate developers lower after a newspaper said property sales will drop. Macquarie Office Trust plunged in Sydney as it negotiated loan refinancing.
Simultaneous Recessions
Last week’s Christmas break gave U.S. markets trading volumes on Dec. 26 that were less than half the three-month average. The Standard & Poor’s 500 Index added 0.5 percent that day, as GMAC LLC’s conversion to a bank spurred a rally in General Motors Corp.
The MSCI Asia Pacific Index’s slump this year has taken the average value of companies on the gauge to 13 times estimated profit, more than a fifth below the level at the start of this year. Stocks worldwide have plunged in 2008 as the collapse of the American housing market pulled the U.S., Europe and Japan into their first simultaneous recessions since World War II.
South Korea’s economy may shrink in the first half of next year because of the global slowdown, President Lee Myung Bak said two days ago. A Bank of Korea index of consumer confidence released today showed that sentiment sank this month to the lowest level since the fourth quarter of 1998. A Hong Kong government report today may show exports fell 5 percent in November, according to a Bloomberg News economist survey.
Hynix’s Credit Downgrade
“The concern now is how much things will slow, and for how long,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. “You’re seeing a synchronized global slowdown, and that means earnings are still at risk.”
Samsung Electronics, Asia largest maker of chips, dropped 2.4 percent to 445,000 won. Also in Seoul, Posco, Asia’s third- biggest steelmaker, dropped 2 percent to 370,000 won.
Hynix, the world’s second-largest computer-memory maker, slumped 4.5 percent to 6,620 won after S&P cut its debt rating on Dec. 26 to four levels below investment grade. On the same day, the chipmaker said it will sell 60 million new shares, potentially diluting the value of existing securities.
In Hong Kong, Henderson Land, controlled by billionaire Chairman Lee Shau-kee, dropped 2 percent to HK$29.20, while Cheung Kong (Holdings) Ltd., the city’s second-biggest developer by value, lost 1.5 percent to HK$71.90.
Rising Fuel Costs?
Mitsubishi Paper dived 5.8 percent to 210 yen, while Oji Paper Co., the nation’s largest consumer of high-sulfur fuel oil, sank 3.3 percent to 522 yen. Cathay Pacific Airways Ltd., Hong Kong’s largest carrier, dropped 1.9 percent to HK$8.50. Oil futures in New York gained 2.4 percent in after-hours trading, taking a two-day advance to 9.3 percent.
Energy and raw-material producers posted the largest gains among the MSCI Asia Pacific’s 10 industry groups today.
Inpex, Japan’s largest oil explorer, rose 5.6 percent to 659,000 yen. Woodside Petroleum Ltd., Australia’s No. 2 oil producer, gained 5.2 percent to A$34.62.
Gold producers advanced after prices of the precious metal had the biggest gain for a most-active contract since Dec. 17. Gold futures for February delivery climbed 2.7 percent to $871.20 an ounce in New York on Dec. 26.
Mergers, Acquisitions
Zhongjin Gold Corp., China’s second-biggest producer, jumped 7.6 percent to 36.79 yuan. Zijin Mining Group Co., the country’s largest miner of the metal, added 5.5 percent to HK$4.42 in Hong Kong.
The number of property transactions in the city will drop 22 percent to 114,000 this year from 2007, while the value will fall 21 percent to HK$413 billion ($53 billion), the Standard newspaper said, citing Centaline Property Agency Ltd.
Mitsui Sumitomo Insurance surged 6 percent to 2,825 yen. The company, Aioi Insurance Co. and Nissay Dowa General Insurance Co. are in talks to create Japan’s largest non-life insurer, two people familiar with the negotiations said. Spokesmen from the three companies said they didn’t have any announcement to make.
Aioi Insurance jumped 16 percent to 470 yen, the biggest advance on the MSCI Asia Pacific Index today. Nissay Dowa rose 12 percent to 562 yen.
“If you see mergers, it’s a good sign,” said AMP’s Naeimi. “It shows that companies are starting to understand that there’s value out there and are beginning to take advantage of the cheap valuations.”
Elpida, Macquarie Office
Elpida, Japan’s largest computer-memory chipmaker, soared 13 percent to 584 yen. The company has begun merger talks with Taiwanese chipmakers including Powerchip Semiconductor Corp., Yukio Sakamoto, chief executive officer of Tokyo-based Elpida, said in an interview on Dec. 26, without elaborating.
The four companies combined would challenge South Korea’s Samsung Electronics as the world’s biggest producer. Powerchip added 0.3 percent to NT$3.69.
Macquarie Office Trust, Australia’s No. 1 office property trust by assets, plunged 12 percent to 29 cents in Sydney as it negotiates to refinance a $74.5 million loan. The company today said banks agreed to extend the existing facility to March 1, 2009.
