Asian Stocks Fall for Third Week on Outlook for Economic Growth

By Chen Shiyin

Aug. 16 (Bloomberg) -- Asian stocks declined for a third week, driving the region's benchmark index to a two-year low, on concern that economic growth in Japan and China is faltering.

Mitsui Fudosan Ltd. led property stocks lower in Tokyo after developer Urban Corp. filed for bankruptcy and Japan's housing investment unexpectedly fell. Aluminum Corporation of China Ltd. dropped after reports showed the nation's producer prices rose at the fastest pace since 1996 and industrial-output growth cooled. Telstra Corp. and Singapore Telecommunications Ltd. led phone companies lower after posting earnings that missed estimates.

``The broader concern now is with economic growth, especially with signs that even China is slowing down,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets worldwide. ``It's possible that you'll see more earnings downgrades.''

The MSCI Asia Pacific Index lost 1.8 percent to 124.84 this week, the lowest since August 2006. It's dropped 21 percent this year as soaring food and fuel prices threatened consumer spending and corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.

Japan's Nikkei 2005 Stock Average dropped 1.1 percent in the week. China's CSI 300 Index slumped 5.6 percent, the region's biggest loss. Benchmarks declined in most markets.

Mitsui Fudosan, Japan's No. 1 developer, slipped 2.4 percent to 2,275 yen. Mitsubishi Estate Co., the second-biggest, dropped 4.4 percent to 2,390 yen. Tokyu Land Corp., a smaller developer, plunged 9 percent to 477 yen.

Urban's Bankruptcy

Urban, Japan's worst-performing real-estate stock this year, plunged 94 percent to 6 yen this week after saying it sought protection from creditors, with $2.35 billion in debt, the biggest corporate failure in Japan this year. It joined builders Zephyr Co. and Kyoei Sangyo Co. that went bankrupt last month.

Property stocks also declined after the government said Japan's economy contracted 0.6 percent last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less. The GDP report also showed housing investment dropped 3.4 percent last quarter, compared with expectations for an increase.

``Urban's bankruptcy is stoking fears that more are on the way, even among seemingly profitable companies,'' said Yoshihiro Ito, senior strategist at Okasan Asset Management Co. in Tokyo, which oversees the equivalent of $9.3 billion. ``The market is trying to figure out whether this economic slump is going to be deep or shallow.''

Inflation, Production

China's factory-gate prices rose 10 percent in July, the fastest since 1996, on soaring energy and commodity costs, the statistics bureau said on Aug. 11. It also said production climbed 14.7 percent last month, the slowest pace since February 2007, after China capped factory production ahead of the Olympic Games to clear the air.

Aluminum Corp., China's biggest producer of the metal, tumbled 10 percent to 10.34 yuan, rounding off its fifth straight week of losses. Zhuzhou Smelter Group Co., China's largest zinc producer, plunged 14 percent to 6.71 yuan.

Telstra, Australia's No. 1 phone company, fell 2.6 percent to A$4.42 after it reported an A$1.77 billion ($1.54 billion) profit in the second half, missing the A$2.11 billion median estimate in a Bloomberg survey of analysts.

Singapore Telecommunications (ST SP), Southeast Asia's largest phone company, slipped 0.1 percent to S$3.49 after saying first-quarter profit dropped 5.3 percent, more than analysts had forecast, as a stronger currency eroded overseas earnings.

The MSCI Asia-Pacific Telecommunication Services Index fell 4.15 percent this week, the largest retreat among the broader index's 10 industry groups. China Mobile Ltd. (941 HK), the world's largest phone company, dropped 6.6 percent to HK$93.45 in Hong Kong after Citigroup Inc. cut its share-price estimate by 20 percent.

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