Asian Stocks Drop for Fourth Week; Sumitomo Mitsui Falls

By Chen Shiyin and Ian C. Sayson
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Aug. 22 (Bloomberg) -- Asian stocks fell, driving the region's benchmark index to the lowest since July 2006, after renewed credit-market concerns weighed on financial companies and higher crude prices sent refiners and airlines lower.

Sumitomo Mitsui Financial Group Inc. slumped 3.6 percent, leading declines among financial shares as Li Ka-shing, Asia's richest man, predicted the credit crunch will worsen. GS Holdings Corp., operator of South Korea's No. 2 refiner, dropped 3.6 percent as Goldman Sachs Group Inc. cut the stock's rating. Korean Air Lines Co., the country's largest carrier, retreated 1.6 percent following the biggest gain in oil in two months.

``Consumer spending is shrinking from rising oil prices and higher inflation is increasing the costs of companies,'' said Choi Min Jai, who helps manage about $5 billion at KTB Asset Management Co. in Seoul. ``It doesn't help that this is happening while the subprime problem in the U.S. seems to be getting worse.''

The MSCI Asia Pacific Index lost 0.8 percent to 121.97 as of 7:25 p.m. in Tokyo. Hong Kong was shut as Typhoon Nuri swept over the city.

The Asian benchmark index has dropped 2.3 percent this week, its fourth-straight retreat. That has taken the gauge's 2008 slump to 23 percent as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.

Japan's Nikkei 225 Stock Average fell 0.7 percent to 12,666.04. China's CSI 300 Index lost 1.5 percent, the region's largest retreat. Australia's S&P/ASX 200 Index added 1.2 percent as higher raw-material prices lifted shares of BHP Billiton Ltd.

More Writedowns

U.S. stocks rose yesterday after the biggest three-day advance by energy companies since 2002 overshadowed speculation credit writedowns at financial firms will increase. Standard & Poor's 500 Index futures fell 0.2 percent today.

A measure of financial shares on the S&P 500 index dropped 1.1 percent yesterday, after Citigroup analyst Prashant Bhatia said Goldman Sachs, Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion in the third quarter.

Sumitomo Mitsui, Japan's second-largest publicly traded bank by market value, retreated 23,000 yen to 637,000, its lowest close since September 2004. Kookmin Bank, South Korea's No. 1 bank, dropped 6.1 percent to 55,900 won.

The ``worst is yet to come'' from the global credit crisis, Hong Kong-based Li said yesterday, adding that he has turned ``very conservative about acquisitions.'' His comments echoed those by Nobel Prize-winning economists Myron Scholes and Joseph Stiglitz, who said yesterday the credit squeeze will inflict more pain on global growth.

Woori Investment & Securities Co., South Korea's fourth-largest brokerage by market value, slipped 2.7 percent to 19,750 won after saying yesterday its July profit tumbled 92 percent from a year earlier.

Worst Is Over?

``Though the worst period of the financial crisis is probably over, we will still see global financial companies report more losses on asset writedowns,'' said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which manages about $94 billion. ``Given increasing demand in emerging countries, I don't think crude will tumble by a large degree.''

Korean Air dropped 650 won to 41,150. Singapore Airlines Ltd., Southeast Asia's biggest carrier, lost 2.5 percent to S$14.88.

Crude oil for October delivery surged 4.9 percent to $121.18 in New York, the biggest increase since June 6, after a slump in the dollar prompted investors to buy commodities. Oil also rose on increased concern that Russia will disrupt supplies following the signing of a missile-shield agreement between the U.S. and Poland.

The Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, heading towards its biggest weekly gain in 33 years.

BHP Gains, GS Drops

BHP, the world's largest mining company, jumped 3.1 percent to A$40.15, while Rio Tinto Group, the third-biggest, added 1.8 percent to A$121. Woodside Petroleum Ltd., Australia's No. 2 oil and gas explorer, rallied 3.4 percent to A$57.

GS Holdings fell 1,150 won to 31,250 in Seoul, the lowest close since March 6, 2007. Goldman Sachs cut the stock's recommendation to ``sell'' from ``neutral,'' citing weaker gasoline demand in the U.S. and the prospects of lower diesel imports by China and India. It lowered its rating on the industry to ``cautious'' from ``neutral.''

Goldman Sachs also downgraded Macquarie Infrastructure Group, Australia's largest developer of toll roads, to ``sell'' from ``hold,'' after the company said yesterday profit for the year to June 30 fell 55 percent. The shares plunged 10 percent to A$2.23, the largest decline on MSCI's Asian index.

To contact the reporter for this story: Chen Shiyin in Jakarta at schen37@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net