Asian Stocks Drop, Led by Banks, on Growing Financial Concerns

By Chen Shiyin and Patrick Rial

July 15 (Bloomberg) -- Asian stocks fell for a second day, led by financial companies, as concern mounted credit-market losses will widen after a report said Japan's top three banks hold more than $40 billion in Fannie Mae and Freddie Mac debt.

Mizuho Financial Group Inc. led declines in Tokyo following the Nikkei newspaper report. U.S. financial shares dropped the most in eight years yesterday after investor Jim Rogers said the Treasury Department's plan to shore up Fannie Mae and Freddie Mac is an ``unmitigated disaster'' and Goldman Sachs Group Inc. predicted the shares would resume falling.

``Even with the U.S. government working to resolve the problems among financial companies, we are not going to see any quick resolution,'' Mamoru Shimode, Tokyo-based chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. ``The banks' holdings of Fannie and Freddie debt are a concern.''

The MSCI Asia-Pacific Index lost 0.3 percent to 132.01 at 9:03 a.m. Tokyo time, following a 0.9 percent retreat yesterday. About five stocks declined for each that rose on the index.

The regional benchmark has dropped 17 percent this year. A measure of financial shares has posted the largest slump among 10 industry groups as the world's largest banks and securities firms reported more than $414 billion of writedowns and credit losses.

Japan's Nikkei 225 Stock Average declined 1.2 percent to 12,849.90, on course for its lowest close since April 1. Benchmarks also fell in Australia, New Zealand and South Korea.

U.S. stocks dropped yesterday, sending the Standard & Poor's 500 Index 0.9 percent lower. Washington Mutual Inc. and National City Corp. slumped after last week's collapse of IndyMac Bancorp Inc. spurred speculation regional banks are short of capital.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.