By Chen Shiyin and Chua Kong Ho
July 4 (Bloomberg) -- Asian stocks dropped on concern record oil and slowing growth will dent profits. The region's benchmark index slumped to an 20-month low, while Japan's Nikkei 225 Stock Average extended its longest losing streak in 54 years.
Kyushu Electric Power Co. led power producers lower after oil rose above $145 a barrel. Bumiputra-Commerce Holdings Bhd. paced declines in Malaysia after UBS AG cut its forecast for banks' profits, citing higher consumer prices and weaker growth. State Bank of India fell after Morgan Stanley reduced its share- price estimates for the nation's government-run banks, citing slower loan growth.
``It's going to be a difficult second half unless we get a sharp fall in the oil price,'' said Lim Kok Boon, Singapore-based chief investment officer at Fortis Private Banking, which oversees $9 billion ``There's going to be a lot of pain.''
The MSCI Asia-Pacific Index declined 0.3 percent to 132.18 at 1:59 p.m. Tokyo time, after earlier dropping to 131.97, which would be the lowest close since November 2006. The index is set to complete a four-week, 12 percent slide, the longest losing streak since the period ended Feb. 8.
Japan's Nikkei 225 slid 0.8 percent to 13,162.41, capping a 12-day, 9 percent slump. The Kuala Lumpur Composite Index dropped 2.5 percent, Asia's largest decline, after trading resumed in Malaysia following a one-day suspension because of a systems failure. All Asian benchmark indexes declined this week, except Vietnam.
Most U.S. stocks fell yesterday, completing the longest streak of weekly declines in four years, after Nvidia Corp. cut its sales forecast. Markets are closed today for a holiday.
Kyushu, Tenaga
Kyushu Electric, Japan's fifth-largest power producer by market value, lost 1.1 percent to 2,185 yen. Chubu Electric Power Co. fell 2.1 percent to 2,525 yen. Tenaga Nasional Bhd., a Malaysian state-controlled power producer, dropped 3.8 percent to 7.70 ringgit.
Crude oil rose 1.2 percent to $145.29 a barrel yesterday in New York and touched a record high of $145.85 during the day. Futures have more than doubled from a year earlier, spurring finance ministers from the Group of Eight nations to say last month that surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy.
``Investors have never experienced a surge in oil like this and they are clueless about when it ends or the effect on corporate earnings,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion. ``This isn't a situation investors can cope with.''
MSCI's Asian index fell 13 percent in the first half, the worst start since 1992, as $400 billion in bank writedowns and credit-related losses and rising oil prices offset efforts by central banks to bolster confidence in financial markets.
Babcock & Brown
Declines among utilities were capped after Babcock & Brown Power said it will sell a power station for A$700 million ($672 million), using the profits to cut debt. The stock jumped 11 percent to 73.5 Australia cents, trimming its year-to-date loss to 73 percent.
Parent Babcock & Brown Ltd., Australia's second-biggest securities firm, rose 3.7 percent to A$7.22. The shares have declined 73 percent this year, the worst performer among the MSCI Asian index's 990 members.
Bumiputra-Commerce, the second-largest, dropped 4.6 percent to 7.20 ringgit, set for its lowest since November 2006. Malayan Banking Bhd., the No. 1 bank, lost 2.1 percent to 6.90 ringgit, while Public Bank Bhd., Malaysia's third-largest bank, slipped 2 percent to 10 ringgit.
Banks' Earnings
UBS cut its earnings estimates for banks, saying borrowers' abilities to repay loans have been affected by inflation. CLSA Ltd. also cut its share-price forecasts for Maybank, Public Bank and two other Malaysian banks.
Malaysia's inflation may reach a nine-year high of 5 percent in July after the government raised gasoline and diesel prices, Bank Negara Malaysia said earlier this month. The central bank will meet to review borrowing costs on July 25. Central banks in Indonesia, Taiwan, India, Vietnam and the Philippines have all boosted interest rates since the start of June.
Bursa Malaysia Bhd., operator of the nation's stock exchange, dropped 5.8 percent to 6.45 ringgit, set for the lowest close since November 2006. The trading suspension yesterday was caused by a hardware systems failure, ``the worst'' experienced by Bursa, Chief Executive Officer Yusli Mohamed Yusoff said yesterday.
State Bank, India's largest, fell 0.9 percent to 1,090.95 rupees. Morgan Stanley cut its price target for the company by 39 percent, and lowered estimates for Punjab National Bank, Bank of Baroda, Corporation Bank, Canara Bank, Union Bank of India, Bank of India, and Oriental Bank of Commerce.
In Hong Kong, Industrial and Commercial Bank of China Ltd., the world's largest lender by market value, led gains among Chinese banks after saying first-half profit probably rose by more than 50 percent. The shares rose 2.6 percent to HK$5.14, the most since May 13.
Shanghai Pudong Development Bank Co. rose 3 percent to 21.04 yuan in Shanghai after saying profit in the first half may have gained more than 140 percent on increased lending, higher fee income and a lower tax rate.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net
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