By Patrick Rial and Shani Raja
Sept. 18 (Bloomberg) -- Asian stocks tumbled to the lowest in three years while gold and U.S. Treasuries surged as concerns mounted more financial firms will collapse.
Macquarie Group Ltd., Australia's largest investment bank, plunged 17 percent after lending seized up following the U.S. government's takeover of American International Group Inc. Newcrest Mining Ltd. led a rally by gold producers while U.S. three-month Treasury yields fell to the lowest since World War II as investors fled stocks in search of safe havens.
``Confidence has been shattered,'' said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $108 billion. ``The market is worried about a domino effect in the financial sector, with no one sure who's going to fall next.''
The MSCI Asia Pacific Index dropped 2.4 percent to 107.90 as of 10:40 a.m. in Tokyo, the lowest since October 2005.
Japan's Nikkei 225 Stock Average lost 2.7 percent to 11,431.17. Equity benchmarks throughout the region declined, with Taiwan shares falling 4.2 percent.
More than $19 trillion has been wiped off global stock market value since a high on Oct. 31 as the worst U.S. housing recession since the Great Depression and a resulting global credit crisis slowed the world economy. This week, Lehman Brothers Holdings Inc. filed for bankruptcy and the U.S. government had to take over AIG.
U.S. stocks slumped to the lowest in three years yesterday, with the Standard & Poor's 500 Index sliding 4.7 percent.
Bank Lending Freezes
Macquarie slid 17 percent to A$28.11, taking its loss since a May 2007 high to 70 percent. The outlook on Macquarie's credit rating was yesterday lowered to negative from stable by Standard & Poor's, implying a one-in-three chance of a cut to the rating.
Babcock & Brown Ltd., Australia's second-biggest investment bank, retreated 17 percent to 76.5 cents. Babcock has plunged 97 percent this year, making it the third-largest loser in 2008 on the MSCI World Index behind Fannie Mae and Freddie Mac.
Kookmin Bank, South Korea's largest lender, declined 6.1 percent to 52,800 won. Sumitomo Mitsui Financial Group Inc., Japan's No. 3 listed bank, slumped 5.9 percent to 586,000 yen.
In a sign that banks have lost confidence in the solvency of their competitors, the London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent yesterday, the biggest advance since Sept. 29, 1999.
``This is a major real event where the epicenter is financial firms,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which holds about $128 billion of assets. ``Because it is banking and banking lies at the heart of all economies, it's disruptive to the real economy as well.''
Unprecedented
The perceived risk of U.S. government debt, long held to be absent of any default risk, also climbed to a record yesterday as the government's involvement in bailing out financial markets weighed on its own financial standing.
``People want to avoid any type of risk,'' said Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., with $54.6 billion in assets. ``I've never seen this kind of crisis before,'' said Okumoto, who has been in the financial-services industry for 23 years.
U.S. Treasury three-month bill rates were 0.071 percent as of 9:21 a.m. in Tokyo. They dropped 65 basis points yesterday to close at 0.04 percent. Two-year yields were 1.65 percent, near the lowest since April.
The dollar fell for a second day against the euro.
``You can't choose the dollar when the world's financial problems radiate from the U.S.,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust & Banking Co., a unit of Japan's largest brokerage. ``Credit markets show no signs of settling down and traders are focused on whether other banks will fail.''
Safe Haven?
Newcrest Mining Ltd. paced gains in Australian gold stocks after the price of gold surged the most in 26 years and silver rose the most since 1979 yesterday.
Newcrest, Australia's largest gold producer, climbed 14 percent to A$24.34, the biggest gain since September 1999. Lihir Gold Ltd. jumped 18 percent, the most in 8 years, to A$2.53 and Sino Gold Mining Ltd. gained the most on record. Sumitomo Metal Mining Co., the biggest in Japan, gained 5.8 percent to 1,104 yen.
Sony Corp., the maker of the PlayStation 3 game console, lost 7.8 percent to 3,300 yen, a level not seen since June 2003. JPMorgan Chase & Co. and Goldman Sachs Group Inc. cut their investment ratings on Sony.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net. Shani Raja in Sydney at sraja4@bloomberg.net.
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