Asian Stocks Drop on Credit-Loss Concern; Mitsubishi UFJ Slides

By Chen Shiyin

Aug. 19 (Bloomberg) -- Asian stocks fell, sending a regional benchmark to a two-year low, as speculation the U.S. government will bail out the country's biggest mortgage-finance companies renewed concern turmoil in global financial markets will linger.

Mitsubishi UFJ Financial Group Inc. dropped 2.3 percent after Barron's said the U.S. expects Fannie Mae and Freddie Mac will fail to raise the equity they need to offset credit losses. National Australia Bank Ltd. declined 2.5 percent after Credit Suisse Group downgraded the stock. Babcock & Brown Ltd. tumbled 8.2 percent on a report that Executive Chairman Jim Babcock has brought forward plans to step down.

The MSCI Asia Pacific Index lost 1.6 percent to 123.18 as of 9:40 a.m. in Tokyo, set for the lowest close since July 26, 2006. Financial companies were the biggest drag, accounting for more than a quarter of the benchmark index's retreat.

The measure has slumped 22 percent this year as soaring inflation hurt 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 slipped 2.6 percent to 12,822.48. Benchmarks also retreated in South Korea, Australia and New Zealand.

U.S. stocks declined yesterday, sending the Standard & Poor's 500 Index to its largest drop in more than a week. Freddie Mac and Fannie Mae slumped to the lowest levels in almost two decades, losing more than 22 percent.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.