Asian Stocks Drop to Lowest in Six Months; Mitsubishi UFJ Falls

By Chua Kong Ho and Shani Raja

July 8 (Bloomberg) -- Asian stocks fell, driving the benchmark index to a six-month low, on concern financial companies will be forced to take more writedowns related to credit-market losses.

Mitsubishi UFJ Financial Group Inc. dropped in Tokyo after analysts said the two largest U.S. mortgage-finance companies may need to raise extra capital. Kookmin Bank, South Korea's largest, tumbled the most in almost four months after JPMorgan Chase & Co. cut its rating on the stock. Inpex Holdings Inc., Japan's largest oil explorer, and Woodside Petroleum Ltd. declined after crude fell almost $4 a barrel.

``We haven't seen the worst of defaults yet,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``We're still in a bear market and it's time to remain cautious.''

The MSCI Asia-Pacific Index dropped 0.8 percent to 132.17 at 10:46 a.m. Tokyo time, set for the lowest close since January 22. More than three stocks retreated for each that rose.

A measure of financial shares on MSCI's Asian index has fallen 21 percent this year, the biggest slump among 10 industry groups, as more than $401 billion of writedowns and credit losses at the world's largest banks and securities firms weighed on earnings.

Japan's Nikkei 225 Stock Average lost 1.8 percent to 13,117.80. South Korea's Kospi Index dropped 1.6 percent. Most Asian markets open for trading declined.

U.S. stocks fell yesterday, led by Fannie Mae and Freddie Mac. The largest U.S. providers of home-mortgage financing tumbled to the lowest levels in more than 13 years after Lehman Brothers Holdings Inc. analysts said an accounting change may force the companies to raise a combined $75 billion.

Banks Drop

Mitsubishi UFJ declined 2.3 percent to 945 yen, while Sumitomo Mitsui Financial Group Inc. dropped 2.5 percent to 784,000 yen.

Kookmin Bank slumped 5.8 percent to 56,700 won, the most since March 18. JPMorgan cut its rating to ``neutral'' from ``overweight,'' saying Kookmin may not have enough capital to complete its plan to set up a holding company.

Inpex dropped 3 percent to 1.3 million yen, the most since June 20. Woodside, Australia's second-biggest oil and gas producer, slid 0.9 percent to A$59.55, a fourth-straight decline. Santos Ltd., the No. 3 Australian producer, declined 1 percent.

Crude oil fell $3.92 to $141.37 a barrel in New York yesterday and was recently at $141.27.

To contact the reporter for this story: Chua Kong Ho at in Shanghai or kchua6@bloomberg.netShani Raja in Sydney at sraja4@bloomberg.net.