Asian Stocks Drop to Lowest Since November 2006; Banks Decline

By Chua Kong Ho and Shani Raja

July 8 (Bloomberg) -- Asian stocks fell, driving the benchmark index to the lowest since November 2006, on concern that credit-market losses will widen and inflation will curb global growth.

Mitsubishi UFJ Financial Group Inc. dropped in Tokyo after Lehman Brothers Holdings Inc. analysts said the two largest U.S. mortgage-finance companies may need to raise $75 billion in capital. Kookmin Bank, South Korea's largest, tumbled the most in almost four months after JPMorgan Chase & Co. cut its rating. Compal Electronics Inc. slumped in Taipei after missing its target for laptop shipments. Inpex Holdings Inc., Japan's largest oil explorer, 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 1.2 percent to 131.69 at 12:02 p.m. Tokyo time, set for the lowest close since Nov. 21, 2006. More than three stocks retreated for each that rose. The index is valued at about 14 times earnings, the cheapest since March.

Japan's Nikkei 225 Stock Average lost 1.8 percent to 13,117.80. South Korea's Kospi Index dropped 2.6 percent, the most since March 13. Taiwan's Taiex Index fell 1.2 percent to the lowest since November 2006.

MSCI's Asian index has tumbled 24 percent since its peak on Nov. 1, beyond the 20 percent threshold many consider to signal a bear market. A measure of financial stocks led the decline, dropping 30 percent, as more than $401 billion of writedowns and credit losses at the world's largest banks and securities firms weighed on earnings.

U.S. Futures Decline

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 analysts said an accounting change may force the companies to raise a combined $75 billion. Futures for the Standard & Poor's 500 Index dropped 0.5 percent recently.

Mitsubishi UFJ declined 2.3 percent to 945 yen, while Sumitomo Mitsui Financial Group Inc. dropped 2.4 percent to 785,000 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.

GPT Group, Austalia's fourth-biggest real estate trust, tumbled 9.5 percent to A$1.90, the lowest since May 1984, after Standard & Poor's lowered its credit rating, and Merrill Lynch & Co., Citigroup Inc. and Goldman, Sachs & Co. cut their recommendations on the stock.

Compal, Au Optronics

Compal, the world's second-largest maker of notebook computers, lost 5.2 percent to NT$30.75 in Taipei, the largest decline since Jan. 22. The company said shipment growth will be little changed in the three months ended June 30 from the first quarter, compared with an earlier forecast for a 5 percent increase.

AU Optronics Corp., the world's third-biggest manufacturer of liquid-crystal displays, lost 4.3 percent to NT$45.60 after saying it may shut production lines and cut capital spending this year because of lower-than-expected demand for LCD monitors and televisions.

Chi Mei Optoelectronics Corp. fell 4.7 percent to NT$33.30.

Inpex dropped 4.5 percent to 1.28 million yen, the most since May 28. Mitsui & Co., for which energy trading is the second-biggest contributor to profit, declined 3.7 percent to 2,190 yen.

Crude oil fell $3.92 to $141.37 a barrel in New York yesterday, the most in more the two weeks, 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.