Asian Stocks Fall on U.S. Recession Concern; Toyota Declines

By Chua Kong Ho and Ian C. Sayson

July 29 (Bloomberg) -- Asian stocks fell after the International Monetary Fund said there is no end in sight to the U.S. housing recession and as higher energy costs erode earnings.

Toyota Motor Corp., Japan's largest carmaker, dropped after lowering its sales forecast amid declining U.S. demand. Commonwealth Bank of Australia led financial companies lower after Merrill Lynch & Co. said it plans to raise $8.5 billion to replenish capital. Tokyo Electric Power Co. and Kansai Electric Power Co., Japan's biggest utility companies, declined after forecasting losses due to higher energy costs.

``Risk aversion is getting renewed again,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc., which manages about $5.9 billion in assets. ``The recent developments highlight that the situation in the U.S. is far from over. We could see more downside from here as corporate earnings are released.''

The MSCI Asia Pacific Index fell 2 percent to 131.33 as of 10:54 a.m. in Tokyo. About 16 stocks retreated for each that rose. Financial stocks accounted for 34 percent of the index's decline.

Japan's Nikkei 225 Stock Average dropped 2.2 percent to 13,058.30. The country's jobless rate rose to the highest in almost two years in June and household spending fell. All Asian markets open for trading fell.

In the U.S., the Standard & Poor's 500 Index dropped 1.9 percent after the IMF warned that worsening credit conditions may prolong the economic slowdown. Futures on the S&P 500 were little changed today.

MSCI's benchmark index for Asia has slumped 24 percent from its Nov. 1 record as financial institutions worldwide suffered $468.5 billion in writedowns and credit losses stemming from the collapse of the subprime mortgage market.

`Not Visible'

``At the moment, a bottom for the housing market is not visible,'' the IMF said in its Global Financial Stability Report, released yesterday in Washington. ``Stemming the decline in the U.S. housing market is necessary for market stabilization.''

Toyota sank 3.7 percent to 4,700 yen, the biggest drop since March 31. The company cut its forecast for worldwide vehicle sales this year by 350,000 units to 9.5 million, as record U.S. gasoline prices erode sales of trucks and sport-utility vehicles.

Honda Motor Co., Japan's second-largest automaker, declined 3.8 percent to 3,510 yen. The company lowered its full-year operating profit forecast last week.

``Investors have no way of seeing how deep this global economic downturn is going to take us,'' Mamoru Shimode, Tokyo- based chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

Banks Decline

Commonwealth Bank of Australia, the nation's largest lender, sank 4.7 percent to A$39.15. Mitsubishi UFJ Financial Group Inc., Japan's largest bank by market value, slid 2.9 percent to 946 yen, while rival Sumitomo Mitsui Financial Group Inc. dropped 3 percent to 820,000 yen.

Kookmin Bank, South Korea's largest, fell 2.5 percent to 55,600 won after UBS AG cut its price estimate by 9 percent, saying the lender is ``destroying value'' by expanding its loans to small and medium-sized businesses.

Merrill Lynch took steps to preserve its credit rating by selling $8.5 billion of stock and liquidating $30.6 billion of money-losing assets at a fifth of their original value. Merrill said it will book $5.7 billion of additional writedowns on collateralized debt obligations and associated hedges.

Tokyo Electric fell 1.1 percent to 2,785 yen, after forecasting its loss may widen to a record 280 billion yen ($2.6 billion) in the year ending March 31, from a 150 billion yen loss a year earlier, after the shutdown of the world's largest nuclear plant forced it to burn costlier oil and gas.

Kansai Electric declined 2.5 percent to 2,360 yen, the most since June 19. The company said it may post a full-year loss of 55 billion yen, compared to its April 30 forecast for a 69 billion profit.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.