Asian Stocks Fall on Credit Concerns, Earnings; Banks Decline

By Chen Shiyin and Patrick Rial

Aug. 26 (Bloomberg) -- Asian stocks fell, led by financial companies, as speculation American International Group Inc. will post a loss reignited concern widening credit writedowns will dent earnings growth.

Mitsubishi UFJ Financial Group Inc. declined 3 percent in Tokyo, leading banks lower, after Credit Suisse Group said AIG may lose $2.41 billion this quarter on mortgage-related writedowns. Suncorp-Metway Ltd., Australia's third-largest general insurer, slumped 3.9 percent following a drop in second- half net income. A profit decline also sent shares of Mirvac Group, an Australian property trust, lower by 3.5 percent.

``With more bad news emerging on U.S. financial shares, it's natural to see the market here take a hit as well,'' Mamoru Shimode, Tokyo-based chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

The MSCI Asia Pacific Index lost 1.3 percent to 122.07 as of 10:04 a.m. in Tokyo, set for its largest drop in a week and almost erasing yesterday's 1.7 percent advance. Financial companies accounted for a third of the measure's retreat.

Banks, securities companies and property firms have led a 23 percent decline in the Asian index this year as the world's largest financial companies posted writedowns and credit losses of more than $500 billion and inflation soared.

Japan's Nikkei 225 Stock Average slipped 1.3 percent to 12,710.82. IHI Corp., the nation's No. 3 maker of heavy machinery, fell after saying it won't pay a dividend in the first half because of a loss. Indexes retreated in other Asian markets.

AIG Plunges

U.S. stocks dropped yesterday, sending the Standard & Poor's 500 Index to its largest loss in a month. AIG tumbled to a 13- year low, while Washington Mutual Inc. led other financial companies lower after Columbian Bank & Trust Co. became the ninth U.S. bank to collapse this year.

Mitsubishi UFJ, Japan's biggest bank by market value, dropped 25 yen to 806. Sumitomo Mitsui Financial Group Inc., the second-largest, lost 3.5 percent to 641,000 yen. Macquarie Group Ltd., Australia's No. 1 securities firm, fell 3.3 percent to A$46.

A gauge of financial companies on MSCI's Asian index has dropped 28 percent this year, the worst performance among the broader measure's 10 industry groups.

AIG tumbled in New York trading after Credit Suisse analyst Thomas Gallagher predicted AIG will lose 86 cents a share in the third quarter, compared with an earlier forecast of a 13-cent profit. ``Recent deterioration'' in debt holdings may cause losses in the firm's credit-default swaps, Gallagher wrote yesterday in a research note.

Suncorp-Metway, Mirvac

Suncorp-Metway slumped 50 cents to A$12.30, on course for its largest drop since Aug. 1, after saying net income tumbled 68 percent in the six months ended June 30 as storms increased and falling financial markets cut investment income. Chief Executive Officer John Mulcahy forecast flat profit growth for its managed funds unit in 2009, and said bad debts may increase as the economy loses momentum.

Mirvac slipped 10 cents to A$2.73. The property trust, which stopped redemptions for three mortgage funds after investors sought to pull out of property assets amid the global credit crisis, said today full-year profit fell 69 percent. Babcock & Brown Infrastructure Group declined 2.4 percent to 62 Australian cents after the owner of ports and energy transmission lines in Australia posted a full-year loss.

IHI retreated 2 percent to 193 yen. The company, which had said it will pay a dividend of 4 yen for the full year, will forgo its dividend payment for the first half. It had forecast in May a loss of 4 billion yen ($36.4 million) in the first half.

SBI Holdings Inc., a venture capital company, plunged 10 percent to 19,280 yen, the biggest retreat on MSCI's Asian index. It has decided not to pay a dividend for the six months ending Sept. 30, SBI said. The company paid an interim dividend of 600 yen a year earlier.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.