Asian Stocks Head for Third Weekly Decline as Oil, Gold Drop

By Chua Kong Ho and Shani Raja

Aug. 15 (Bloomberg) -- Asian stocks fell, set for a third weekly decline, as lower oil and gold prices dragged down commodity shares and Europe joined Japan in reporting an economic contraction.

Cnooc Ltd., China's biggest offshore oil producer, slumped 5.9 percent in Hong Kong. Newcrest Mining Ltd., Australia's No. 1 gold producer, retreated 2.5 percent as gold dropped below $800 an ounce. Fund manager Babcock & Brown Ltd. completed a five-day, 35 percent plunge in Sydney after reporting lower profit.

``This slump in commodities has got further to go and it's going to raise concerns about future earnings growth for the resources stocks,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``It's a catch-up to the slump in global growth. The problem globally is shifting now from just being financial to being a broad-based economic problem.''

The MSCI Asia Pacific Index lost 0.6 percent to 124.87 as of 4:12 p.m. in Tokyo, set to close at its lowest since Aug. 7, 2006. The measure declined 1.8 percent this week, taking this year's drop to 21 percent as soaring fuel and food prices threatened consumer spending and corporate profits, while writedowns and credit losses at financial companies topped $500 billion.

Japan's Nikkei 225 Stock Average gained 0.5 percent to 13,019.41. Most Asian markets open for trading fell, with South Korea and India shut for holidays.

Toyota, Asia's largest automaker, rose after saying the U.S. truck market remains ``viable.'' Mitsui O.S.K. Lines Ltd. led gains among shipping companies after commodity cargo fees increased the most since Jan. 30.

Economic Contraction

U.S. stocks rose for the first time in three days yesterday after a trade group loosened restrictions on Fannie Mae and Freddie Mac to help revive the mortgage industry. Standard & Poor's 500 Index futures gained 0.2 percent today.

Cnooc slumped 5.9 percent to HK$10.54 in Hong Kong, the most since Aug. 5. Woodside Petroleum Ltd., Australia's No. 2 oil and gas producer, slid 2.5 percent to A$54.20, while rival Santos Ltd. declined 1.1 percent to A$17.72.

Oil in New York dropped as much as 1.4 percent to $113.36 a barrel today, after falling 0.9 percent yesterday. Prices have tumbled 23 percent from the record $147.27 reached on July 11.

Europe's gross domestic product fell 0.2 percent in the second quarter from the first, the European Union statistics office in Luxembourg said yesterday. The Bank of England this week cut its growth forecast for the U.K., Japan's economy contracted 2.4 percent last quarter, and China yesterday said industrial production grew at the slowest pace in 17 months.

Falling Copper Output

Newcrest Mining fell 2.5 percent to A$24.43, after gold for immediate delivery slumped as much as 2.2 percent to $788.65 an ounce in Asian trading, falling below $800 an ounce for the first time in almost eight months. St. Barbara Ltd., aiming to become Australia's No. 3 gold producer, dropped 6.7 percent to A$0.21.

``We're going to see softness in commodity prices and stocks as the global economy slows,'' said Mark Tan, Singapore-based portfolio manager at UOB Asset Management Ltd., which oversees about $3 billion in Asian equities. ``Stock markets aren't going to perform with this picture of slowing demand.''

BHP Billiton Ltd., the world's largest mining company, dropped 1.9 percent to A$37.98 after copper prices in London fell as much as 2 percent, extending yesterday's 0.6 percent decline. Output at Escondida, the world's largest copper mine, slid to 725,177 metric tons from 758,696 tons a year earlier, Melbourne- based BHP said yesterday.

Rio Tinto Group, the world's third-largest mining company, declined 2.4 percent to A$115.15. The company said its Yarwun alumina refinery in Queensland will remain shut for at least the rest of the month because of a pipeline blockage.

Corporate Failure

Babcock & Brown tumbled 11 percent to A$4.45. First-half profit dropped by as much as 40 percent, as share and real-estate prices tumbled, eroding the value of its investments, the company said on Aug. 11.

Urban Corp. plunged 81 percent to 6 yen, extending yesterday's 48 percent drop. The Japanese property developer filed for protection from creditors on Aug. 13 with $2.35 billion in debt, the biggest corporate failure in the country this year.

Central Japan Railway Co., the country's biggest bullet- train operator, fell 2 percent to 1.091 million yen, after Mizuho Securities Co. lowered its rating on the company to ``hold'' from ``buy'' yesterday, citing potential weakness in the Japanese economy.

Limiting losses, Toyota added 2.9 percent to 5,020 yen, snapping a three-day slide. Bob Carter, group vice president of Toyota's U.S. sales unit, said the market for large pickup trucks in the U.S. remains ``one of the most viable, largest segments in the industry.''

Rising Transport Costs

Shipping lines advanced as the Baltic Dry Index, which tracks transport costs of raw commodities on international trade routes, surged 4.6 percent, the biggest gain since Jan. 30. The benchmark index is down 17 percent this year.

Mitsui O.S.K., the nation's second-largest bulk shipper, climbed 2.8 percent to 1,323 yen. Rival Nippon Yusen K.K. gained 3.1 percent to 900 yen.

Scomi Engineering Bhd., a Malaysian oil and transport services company, jumped 3 percent to 1.04 ringgit, the highest since May 22, after Bernama reported it may win a 1.01 billion ringgit ($302 million) project to build a 20-kilometer elevated monorail in Mumbai.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net