Asian Stocks Decline, Led by Nippon Yusen, Korean Air, Honda

By Chen Shiyin

July 2 (Bloomberg) -- Asian stocks declined for the ninth time in 10 days, led by automakers and shipping companies, as near-record oil prices drove up costs and curbed spending.

Toyota Motor Corp. retreated in Tokyo after its U.S. sales slumped 21 percent last month. Korean Air Lines Co. dropped to a 14-month low after an analyst said the carrier may post its first operating loss in five years. Nippon Yusen K.K. fell on concern slowing growth will undermine demand for shipping. Japan's Nikkei 225 Stock Average retreated for a 10th day, set for its longest losing streak in 43 years.

``Inflation remains a very big threat to economic growth and earnings with the oil price at such high levels,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets worldwide. ``Equity markets are likely to remain choppy.''

The MSCI Asia Pacific Index lost 0.9 percent to 134.62 at 12:45 p.m. in Tokyo, adding to a 5.9 percent drop in the past nine days. More than two stocks fell for each that gained, as all but one of the index's 10 industry groups declined. The measure is on course for its lowest close since March 20.

Japan's Nikkei 225 sank 1 percent to 13,331.98. South Korea's Kospi index lost 2.2 percent, the region's biggest drop.

Just Group Ltd., Australia's biggest specialty clothing retailer, tumbled after cutting its earnings forecast. BHP Billiton Ltd. fell after Credit Suisse Group cut its earnings estimate for rival aluminum producers Alcoa Inc. and Century Aluminum Co.

Futures Decline

In the U.S., futures on the Standard & Poor's 500 Index fell 0.1 percent. The S&P 500 advanced yesterday, boosted by better- than-forecast sales at General Motors Corp.

Toyota, Japan's biggest carmaker, fell 1 percent to 4,960 yen, set for its lowest close since April 16. North America accounts for a third of the company's total sales.

Vehicle sales plunged 18 percent in the U.S. last month, the steepest slump in almost six years, as consumers turned away from gas-guzzling trucks and found small cars in short supply.

Honda Motor, Japan's second-largest automaker, lost 1.1 percent to 3,600 yen.

Nippon Yusen dropped 2.5 percent to 1,002 yen. Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping line by sales, fell 2.7 percent to 1,453 yen. STX Pan Ocean Co., South Korea's largest operator of vessels that transport coal, iron ore and other commodities, fell 3.2 percent to 1,945 won.

Chinese Demand

The Baltic Dry Index, which tracks the price of shipping bulk commodities, declined 2.2 percent yesterday, the largest loss since June 23. The measure fell on speculation Chinese iron- ore demand is weakening as prices rise.

Korean Air Lines Co., South Korea's largest carrier, dropped 5 percent to 45,600 won, set for its lowest close since September 2004 after Korea Investment & Securities Co. said the company will likely post its first operating loss since 2003 because of fuel costs.

Crude oil for August delivery gained as much as 1.1 percent to $142.45 a barrel in New York today, near the record of $143.67 reached on June 30. Futures have doubled in the past year.

Air China Ltd., the nation's largest international carrier, declined 2.3 percent to HK$3.75 in Hong Kong. Qantas Airways Ltd., Australia's biggest airline, dropped 3.4 percent to A$3.13.

MSCI's Asian index fell 0.6 percent yesterday, extending its first-half loss of 13 percent. Declines in the first six months were the index's worst since 1992, as deepening credit-market losses and surging fuel costs weighed on global economic growth.

Rising Prices

South Korean consumer prices rose by the most in almost 10 years last month, while inflation in Indonesia accelerated to a 21-month high in June, according to statistics released this week. In May, Japan's core consumer prices climbed at the fastest pace in a decade, according to a government report last week.

``Commodity prices are going up higher and higher, and now you have tremendous inflationary pressure to raise interest rates,'' said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp., which manages $2 billion in assets. ``When you slow the economy, you slow demand.''

Just Group slumped 14 percent to A$2.75 in Sydney, the largest drop since May 2005. Earnings-per-share will be between 29.2 Australian cents and 30.6 cents in the year ending July 31, compared with last month's forecast of 33.4 cents, the company said today.

BHP lost 3 percent to A$43.08. Credit Suisse analysts led by David Gagliano lowered second-quarter and 2008 earnings estimates for Alcoa, the world's third-largest aluminum producer, and Century Aluminum, the second-biggest U.S. producer.

The analysts said profits will be hurt by higher energy and materials costs and a lower average price for the metal.

BHP is the world's six-largest producer of primary aluminum, according to its Web site.

Rio Tinto Group, the world's third-biggest mining company, slipped 2.8 percent to A$133.69. Nippon Mining Holdings Inc., Japan's biggest copper producer, lost 2.8 percent to 662 yen.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Last Updated: July 2, 2008 00:18 EDT