Asian stocks decline for third day as global recession deepens

February 19, 2009 - 0:0

SYDNEY (Bloomberg) -- Asian stocks dropped for a third day, dragging the regional benchmark index to the lowest level since November, as the deepening global recession hurts corporate earnings and demand for commodities.

Westpac Banking Corp., Australia’s biggest lender by market value, slipped 2.4 percent as a fivefold surge in bad-debt charges caused quarterly profit to drop. BHP Billiton Ltd., the world’s largest mining company, lost 5.5 percent in Sydney after metal and oil prices declined. Sony Corp., which gets a quarter of its sales from the U.S., fell 3.7 percent after a New York manufacturing gauge shrank at the fastest pace on record.
“I’d be very surprised if profit numbers didn’t keep on coming down,” said San Francisco-based Robert Horrocks, who helps manage $4.7 billion including Asian equities at Matthews International Capital Management LLC. “You’re seeing the ripples from the credit shock, where the medium-term effect on demand is a chronic problem that governments are trying to combat.”
The MSCI Asia Pacific Index declined 1.1 percent to 77.84 as of 1:49 p.m. in Tokyo, set to close at the lowest level since Nov. 24. Finance and commodity shares were the biggest drag on the gauge, which has lost 13 percent this year. The measure tumbled by a record 43 percent in 2008, as the credit crisis sent the world’s biggest economies into recession.
Japan’s Topix lost 1.1 percent to 747.97 and earlier sank to as low as 744.37, which would have been the lowest close since January 1984. Hong Kong’s Hang Seng Index dropped 1.6 percent, while Australia’s S&P/ASX 200 Index fell 2.1 percent.
Government action
Futures on the Standard & Poor’s 500 Index rose 0.4 percent today. The gauge slumped 4.6 percent on Tuesday as U.S. President Barack Obama signed a $787 billion stimulus bill into law. After U.S. markets closed, General Motors Corp. said it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid it needs to survive.
CSR Ltd., Australia’s second-largest maker of building products, slumped 15 percent to an eight-year low after forecasting lower profit. ProMOS Technologies Inc., a chipmaker, fell 7 percent in Taipei, the daily limit, as its bondholders demanded repayment of debt.
Governments and central banks have been cutting interest rates and introducing spending packages to reverse the worst global slump since World War II. International Monetary Fund Managing Director Dominique Strauss-Kahn said last week that he expects more countries to apply to the IMF for aid.
The Japanese government, which on Tuesday appointed Kaoru Yosano as its new finance minister, said two days ago that gross domestic product contracted 12.7 percent in the fourth quarter, the most since the 1974 oil shock.
Difficult conditions
A gauge of finance companies on the MSCI index dropped 1.4 percent. The finance measure is the second-worst performer in the past 12 months of 10 industry groups as the credit crisis caused losses at institutions worldwide to swell to more than $1 trillion.
Westpac Banking Corp. declined 2.4 percent to A$16.37 after profit in the three months through December fell 2 percent as bad debts outweighed increased fee income from last year’s purchase of St. George Bank Ltd. Chief Executive Officer Gail Kelly said operating conditions will remain “difficult.”
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, fell 2.9 percent to 438 yen. Sony Financial Holdings, which cut its profit forecast last week, lost 6.6 percent to 256,400 yen.
The Markit iTraxx Japan index of credit-default swaps, which measures the cost of protecting investors in Japanese corporate bonds from default, rose to a record on Wednesday, Barclays Capital prices show.
Slowing global demand
BHP fell 5.5 percent to A$29.97 in Sydney. Aluminum Corp. of China Ltd., the nation’s No. 1 producer of the metal, lost 3.2 percent to HK$3.93, while PetroChina Co., the nation’s largest oil producer, retreated 3.2 percent to HK$5.81.
Concern the global economic slump will deepen drove the Reuters/Jefferies CRB Index of 19 commodities prices to its lowest level yesterday since June 2002. Crude oil tumbled 6.9 percent in New York, the steepest drop since Jan. 27, while copper futures slumped 7.2 percent, the most since Oct. 30.
Sony lost 3.7 percent to 1,598 yen on concern global demand for its televisions and video-game consoles will slow further. The company reported a 95 percent plunge in third-quarter profit on Jan. 29. Canon Inc., the world’s biggest digital-camera maker, slid 2.5 percent to 2,305 yen.
Earnings deterioration
The Federal Reserve Bank of New York’s general economic index sank to the lowest level since records began in 2001. That gauge, released on Tuesday, followed a report this month showing that U.S. consumer confidence was near its lowest since 1981.
CSR plunged 15 percent to A$1.255, the lowest since March 2001. The company said it expects less profit as Australian housing approvals at an eight-year low saps demand for glass, insulation and plaster board. Aluminum prices also dropped 30 percent in the last three months, trimming profits from making the lightweight metal.
“There are looming prospects that corporate earnings will deteriorate even further,” Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. “We’re getting ever closer to historic lows, and that weighs on investor sentiment as well.”
ProMOS, Taiwan’s most unprofitable maker of computer-memory chips, dropped 7 percent to NT$1.47 as bondholders demanded $326.9 million in debt payments, more than triple the company has available.
Fortescue Metals Group Ltd. jumped 15 percent to A$3.06, after Australia’s third-largest iron ore exporter after the Herald Sun reported that China Investment Corp. and Anglo- American Plc were in talks to acquire stakes in the company.