Asian Stocks Drop, Led by Banks, Airlines as Profits Decline

By Patrick Rial and Kyung Bok Cho

Aug. 7 (Bloomberg) -- Asian stocks fell for the third time this week after banks, airlines and shipping companies reported lower earnings on slowing economic growth and increases in raw- material prices.

Mitsubishi UFJ Financial Group Inc. slumped for a second day after raising bad-loan provisions and American International Group Inc. posted an unexpected loss on credit-market writedowns. Cathay Pacific Airways Ltd. dropped as higher fuel costs wiped out profit, while air-conditioner maker Daikin Industries Ltd. fell the most since 1992 as slower European growth cut earnings.

``Asian earnings momentum will be lackluster for the time being with a slower U.S. economy, slower exports and higher costs,'' said Christian Jin, who oversees $1.2 billion as head of global investment at CJ Asset Management Co. in Seoul. ``There are still a lot more writedowns to come, so financials will struggle.''

The MSCI Asia Pacific Index lost 0.9 percent to 127.92 as of 2:53 p.m. in Tokyo. The benchmark index has tumbled 19 percent this year, outpacing a 14 percent decline by MSCI's global gauge.

Japan's Nikkei 225 Stock Average slipped 1.3 percent to 13,081.63. South Korean shares dropped 1.2 percent as the nation's central bank unexpectedly raised interest rates to curb accelerating inflation.

S&P Futures

S&P 500 futures for September fell 0.3 percent as AIG dropped 7.7 percent in extended U.S. trading. The world's biggest insurer by assets wrote down the value of assets including credit-default swaps by $11.64 billion, leading to a $5.36 billion quarterly loss. The U.S. benchmark index advanced 0.3 percent to a six-week high yesterday.

The collapse of the U.S. mortgage market has resulted in more than $492 billion of asset writedowns and credit losses among the world's largest financial institutions.

Cathay Pacific, Hong Kong's biggest carrier, dropped 4.6 percent to HK$14.06, the steepest decline since July 2, after posting its first loss in five years. Japan Airlines Corp., Asia's largest carrier by sales, fell 1.4 percent to 216 yen as it posted a second straight quarterly loss. Hong Kong's stock market was closed yesterday because of a typhoon.

Daikin

Daikin Industries, the world's No. 2 air-conditioner maker, plunged by the daily limit of 11 percent to 4,010 yen in Tokyo after saying slower growth in Europe caused a drop in first- quarter operating profit and prompted the company to lower its earnings forecast.

Neptune Orient Lines Ltd., Southeast Asia's largest container-shipping company, fell 7.6 percent to S$2.54, the lowest level in more than a year, after posting its first profit decline in five quarters because of higher fuel costs. Mitsui O.S.K. Lines Ltd., Japan's second-biggest bulk shipper, slipped 3.1 percent to 1,268 yen after Goldman, Sachs & Co. removed the shares from its ``conviction buy'' list, saying there's no catalyst to drive the shares higher.

Mitsubishi UFJ declined 3.9 percent to 869 yen, the lowest level since March 31. Japan's biggest publicly traded bank Aug. 5 reported a 66 percent slump in net income for the first quarter. Chuo Mitsui Trust Holdings Inc., a smaller rival, slumped 4.3 percent to 603 yen after bad loan costs slashed first-quarter profit by half.

Credit Losses

Woori Finance Holdings Co., which controls South Korea's second-largest bank, tumbled from a one-month high, dropping 4 percent to 15,750 won. John Wadle, a Hong Kong-based analyst at UBS AG, lowered his price estimate on the shares by 12 percent, saying the company will be forced to increase loss provisions as the number of non-performing loans rises.

Samsung Electronics Co., the world's biggest computer- memory maker, declined 2.2 percent to 574,000 won, reversing an earlier gain. Hyundai Motor Co., South Korea's largest automaker, fell 1.4 percent to 70,200 won.

The Bank of Korea raised its benchmark interest rate by a quarter point to 5.25 percent, the highest in almost eight years, to curb the fastest level of inflation in a decade.

Nippon Telegraph & Telephone Corp. plunged 6.9 percent to 525,000 yen, the largest dive since May 2004. Japan's biggest fixed-line phone operator said yesterday earnings at its two regional phone monopolies plunged as customers switched to cheaper Internet-based phones.

Sankyo Co., a maker of pachinko gambling machines, lost 14 percent to 5,480 yen, the biggest decline on record. Masahiko Komuro, a spokesman for Sankyo, said today orders for new machines such as ``Dai Natsu Matsuri,'' have fallen below the company's forecasts.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net