Asian Stocks Fall for a Third Day on Worsening Growth Outlook

By Chen Shiyin and Chua Kong Ho

July 1 (Bloomberg) -- Asian stocks fell, extending the MSCI Asia-Pacific Index's worst first half since 1992, after Chinese manufacturing growth slowed, South Korea's inflation accelerated and Japanese business confidence sank to the lowest in four years.

China Merchants Bank Co. led China's CSI 300 Index to a 15- month low. Sumitomo Mitsui Financial Group Inc. dropped in Tokyo after the Tankan survey showed large companies expect earnings to decline for the first time since the 2001 recession. Rio Tinto Group gained in Sydney following an increase in iron ore prices.

``We're expecting significant downward earnings revisions,'' said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management, which oversees about $12 billion. ``Profits are going to be disappointing.''

MSCI's Asian Index lost 0.3 percent to 136.31 at 3:25 p.m. in Tokyo, extending a 13 percent drop in the six months to yesterday, as record oil prices and credit-market losses weighed on global economic growth. A gauge of financial shares retreated 1.3 percent, the biggest decrease among the measure's 10 groups.

Most national benchmarks declined. Japan's Nikkei 225 Stock Average fell 0.1 percent to 13,463.20, completing a nine-day, 6.8 percent loss. Mazda Motor Corp. slipped after domestic auto sales dropped in June as rising gasoline and food costs lowered demand for new cars. Hong Kong and Thailand are closed for holidays.

Qantas Airways Ltd. surged, posting the biggest gain on MSCI's Asian index, after the carrier said it's considering selling part of its frequent flyer unit in an initial public offering. Indiabulls Real Estate Ltd. led Indian property developers lower after banks raised their mortgage rates.

China's Manufacturing

Most U.S. stocks fell for a third day yesterday, capping the market's worst month in six years, on concern deepening mortgage losses will force more banks to cut dividends or sell shares at a discount. Wachovia Corp. tumbled to the lowest since 1992 after an analyst said the bank may cut its payout. Standard & Poor's 500 Index futures expiring in September rose 0.1 percent recently.

China's CSI 300 fell 2.2 percent, on course for its lowest close since March 2007, after the China Federation of Logistics and Purchasing said today that manufacturing expanded last month at the slowest pace in almost three years. China Merchants, a Shenzhen-based bank, slumped 7.3 percent to 21.72 yuan.

South Korea's consumer prices rose by the most in almost 10 years in June, underscoring speculation the central bank may raise interest rates this year. The consumer price index climbed 5.5 percent from a year earlier, accelerating from May's 4.9 percent gain, the statistics office said.

Easing Growth

The Bank of Korea said economic growth will ease to 4.6 percent this year from 5 percent in 2007.

Hynix Semiconductor Inc., the world's second-largest memory- chip maker, lost 1.8 percent to 24,550 won. Amorepacific Corp., a cosmetics maker, tumbled 6.3 percent to 607,000 won, the biggest drop in about seven months.

Sumitomo Mitsui, Japan's second-largest bank by market value, dropped 2.1 percent to 782,000 yen. Mizuho Financial Group Inc., the third-biggest, lost 2.2 percent to 485,000 yen.

Large companies said profits will drop 7 percent in the year ending March 31, compared with a 0.3 percent increase predicted three months ago, according to the Bank of Japan's Tankan survey. The index of manufacturer sentiment slid to 5 points in June from 11 in March, a third quarterly decline, the bank said today.

``The economy is in a downward trend,'' said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion.

Sales Decline

Mazda, a third owned by Ford Motor Co., dropped 2.7 percent to 536 yen. Nissan Motor Co., Japan's third-largest automaker, lost 1.1 percent to 867 yen. Sales of cars, trucks and buses fell 3.6 percent to 281,261 from a year earlier, the Japan Automobile Dealers Association said in a statement today.

Tokyo Tatemono Co. plunged 14 percent to 588 yen in Tokyo, the biggest slide on MSCI's Asian index, after the builder lowered its full-year net income forecast by 36 percent and cut its sales estimate by 6.4 percent. Mitsubishi UFJ Securities Co. and Deutsche Bank AG downgraded the stock.

In Australia, Rio Tinto rose 1.5 percent to A$137.50 after the world's third-largest mining company said Asian steel mills will pay between 80 percent and 97 percent more for its iron ore in the 12 months to March 31. BHP Billiton Ltd., Rio's largest rival, gained 1.6 percent to A$44.40.

``It's a reversion to the trend we've seen for a few months now: long resources, short financials,'' said Will Seddon, who helps oversee about $500 million at White Funds Management in Sydney. ``The strength in materials is a continuation of people just chasing the only glimmer of light at the moment.''

Qantas, IndiaBulls

Qantas, Australia's largest airline, surged 6.6 percent to A$3.24, the biggest gain since November 2006. The company hired UBS AG, Citigroup Inc. and Macquarie Group Ltd. to advise it on a possible sale of its loyalty program and will make a decision on the sale in August, Qantas said today.

Indiabulls, backed by billionaire Lakshmi Mittal, tumbled 7 percent to 253.45 rupees. DLF Ltd. fell 2.6 percent to 386 rupees while Unitech Ltd. slipped 3.1 percent to 166.1 rupees.

Housing Development Finance Corp., India's largest provider of home loans, said yesterday it will raise the rate it charges its best retail customers by 50 basis points from today. One basis point is 0.01 percentage point.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Chua Kong Ho in Shanghai at Kchua6@bloomberg.net.
Last Updated: July 1, 2008 02:56 EDT