BLBG: Asia Stocks Slump on Concern Bank Losses Will Prolong Recession
Asian stocks declined for a second day, led by financial companies and metals producers, on concern mounting bank losses worldwide will deepen the global recession and squeeze demand for the region’s commodities.
HSBC Holdings Plc, Europe’s largest bank, lost 3.7 percent in Hong Kong amid speculation banks globally need to bolster capital. BHP Billiton Ltd., the world’s biggest mining company, fell 2.1 percent after saying it will take a charge after closing a nickel mine. DBS Group Holdings Ltd., Singapore’s No. 1 lender, led the city’s equities lower after the government cut its economic forecast for the second time in three weeks.
“We don’t know how big loan losses at the banks will be as the economy continues to deteriorate,” said Hugh Dive, who helps manage about $3 billion at Sydney-based Investors Mutual Ltd. “When their capital base is reduced it mitigates their ability to lend, and that slows the broader economy.”
The MSCI Asia Pacific Index dropped 1.2 percent to 82.24 as of 12:45 p.m. in Tokyo, with three of its members falling for each that advanced. Japan’s Nikkei 225 Stock Average lost 0.9 percent, while South Korea’s Kospi Index dropped 1.2 percent. All markets open for trading declined except China.
MSCI’s Asian gauge lost a record 43 percent last year as the worst financial crisis since the Great Depression dragged the world’s biggest economies into recession. The average valuation of companies on the measure has fallen about two-fifths in the past year to 10 times reported profit.
Lower Profit Forecast
China Life Insurance Co., the nation’s largest insurer, lost 5.5 percent in Hong Kong after saying profit last year may have fallen by at least 50 percent. KT Corp. rallied 6.9 percent in Seoul on plans to take over its mobile-phone unit.
Futures on the Standard & Poor’s 500 Index added 0.9 percent. Financial stocks led U.S. equities lower yesterday as Barack Obama was sworn in as president. The Dow Jones Industrial Average declined 4 percent, its biggest Inauguration Day decline.
State Street Corp., the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co. and Bank of America Corp. slumped more than 23 percent on an analyst’s prediction that they’ll need to take steps to shore up their balance sheets.
“The concern is that banks around the world are short of capital,” said Philip Schwartz, who directly manages $800 million of international equities at ING Investment Management in New York. “As we increasingly come to that realization, stocks are just getting hammered.”
Mounting Credit Losses
HSBC fell 3.7 percent to HK$55.40. Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, lost 3.8 percent to 483 yen. National Australia Bank Ltd., the nation’s biggest by assets, declined 3.3 percent to A$17.78.
A measure of financial stocks on the MSCI Asia Pacific Index has lost 13 percent this year, the worst performer among the broader gauge’s 10 industry groups, as global credit-related losses swelled to more than $1 trillion.
Australian Prime Minister Kevin Rudd said yesterday his government will take “whatever action is necessary” to stabilize financial markets. French President Nicolas Sarkozy also agreed to provide more funds to the country’s biggest lenders, a day after the U.K announced its second financial rescue plan in three months.
BHP dropped 2.1 percent to A$28.34. The company said it will book a $1.2 billion pretax charge for the six months ended Dec. 31 after shutting the Ravensthorpe mine and closing part of a refinery. It’s also cutting coking coal output as much as 15 percent, Chief Financial Officer Alex Vanselow said.
‘A Sober Reminder’
Rio Tinto Group, the third-biggest mining company in the world, slipped 2.8 percent to A$36.94, after announcing plans to cut aluminum production and eliminate about 1,100 jobs.
“What we’re seeing today is a sober reminder of the unwinding of the mining boom caused by the global financial crisis,” Australian Treasurer Wayne Swan said today.
Newcrest Mining Ltd., Australia’s largest gold producer, jumped 9.1 percent to A$33.30 after gold rose to the highest in more than a week in New York as investors sought a haven.
DBS declined 2.5 percent to S$8.44, while Singapore Telecommunications Ltd., Southeast Asia’s biggest telephone company, fell 1.2 percent. Gross domestic product may shrink 2 percent to 5 percent this year, the trade ministry said.
China Life dropped 5.5 percent to HK$20.75 in Hong Kong after its profit warning. Angang Steel Co., China’s second- largest steelmaker, fell 8.2 percent to HK$7.27 after saying earnings last year more than halved.
David Jones Ltd., Australia’s second-biggest department store chain, slumped 4.6 percent to A$2.52 after cutting its profit forecast as the nation’s economy slows. Harvey Norman Holdings Ltd., Australia’s biggest furniture and electronics retailer, tumbled 6.1 percent to A$2.16.
KT Corp., South Korea’s largest phone and Internet company, climbed 6.9 percent to 42,450 won after saying it plans to buy the shares of KT Freetel Co. it doesn’t already own. KT Freetel, KT Corp.’s wireless unit, gained 6.2 percent to 30,850 won.
