Asian Stocks Decline as Growth Concerns Eclipse Fannie Rally

By Patrick Rial and Chua Kong Ho

Sept. 9 (Bloomberg) -- Asian stocks fell, paring gains a day after the benchmark index's biggest rally in seven months, as concern that global economic growth is slowing drove down materials, shipping and financial companies.

Newcrest Mining Ltd. and Cnooc Ltd. led commodity stocks to their largest decline in a month after gold and oil retreated. Mitsui O.S.K. Lines Ltd. lost 6.9 percent. Macquarie Group Ltd. dropped 7.3 percent as analysts predicted larger writedowns at Lehman Brothers Holdings Inc., renewing concern that global credit-market losses will widen. Financial shares jumped the most in a decade yesterday after the U.S. government took over Fannie Mae and Freddie Mac.

``Yesterday's rally wasn't sustainable,'' said Daphne Roth, Singapore-based head of equity research in Asia at ABN Amro Private Bank, with about $30 billion of Asian assets. ``The slowdown emanating from the U.S. has spread to the rest of the world and shipping companies are feeling the effects.''

The MSCI Asia Pacific Index dropped 2.1 percent to 118.80 as of 5:22 p.m. in Tokyo, following yesterday's 3.9 percent surge. About five stocks declined for each one that rose, sending all but one of the 10 industry groups lower.

Compal Electronics Inc., the world's second-largest maker of notebook computers, paced declines by technology stocks after cutting its forecast for laptop shipments.

Japan's Nikkei 225 Stock Average lost 1.8 percent to 12,400.65. Taiwan's Taiex Index fell 3.5 percent. BNP Paribas cut its rating on the country's equities to `neutral,' saying valuations are `no longer cheap' compared with Asian peers. Indonesia's Jakarta Composite Index tumbled 4.3 percent, the region's biggest decline. PT Astra Agro Lestari led plantation companies lower after palm oil slumped.

U.S. Futures

All other regional benchmark indexes declined apart from China and New Zealand, which was little changed. Standard & Poor's 500 Index futures were up 0.3 percent recently.

U.S. stocks climbed yesterday, with the S&P 500 rising 2.1 percent, after the Treasury seized the country's two biggest mortgage guarantors, providing as much as $100 billion by purchasing a special class of stock.

The rescue spurred a rally in the dollar, reducing investors' appetite for commodities as a hedge against inflation.

Newcrest, Australia's largest gold producer, slumped 4.3 percent to A$21.20. BHP Billiton Ltd., the world's largest mining company, dropped 4.1 percent to A$36.05, while Cnooc, China's largest offshore oil producer, retreated 3.5 percent.

Gold fell 0.3 percent to $799.74 in London, while silver lost 1.1 percent. Copper fell 0.5 percent. Crude oil declined as much as 1.5 percent to 104.77 today.

Shipping Lines

Mitsui O.S.K., Japan's biggest operator of iron-ore ships, tumbled 6.9 percent to 1,079 yen. Neptune Orient Lines Ltd., Southeast Asia's largest sea cargo carrier, slumped 5.4 percent to S$2.11 in Singapore. Kawasaki Kisen Kaisha Ltd., Japan's third-biggest shipping line, lost 5.9 percent to 659 yen, erasing gains made yesterday.

The Baltic Dry Index, a measure of shipping costs for commodities, fell 3 percent yesterday for a 14th consecutive day of declines and finished at the lowest level since June 2007 on concern Chinese demand for iron ore is slackening.

Macquarie Group, Australia's biggest investment bank, dropped 7.3 percent to A$44.80. Sumitomo Mitsui Financial Group Inc., Japan's third-largest listed bank, slid 2.1 percent to 660,000 yen. Both shares rose more than 10 percent yesterday, leading gains among the region's financial companies.

Oppenheimer & Co. analyst Meredith Whitney and Guy Moszkowski at Merrill Lynch & Co. said yesterday Lehman Brothers may post more writedowns on residential and commercial mortgages.

Sell Into Strength

Andrew Garthwaite, chief global equity strategist at Credit Suisse Group, said in a note dated yesterday investors should sell into the share rally sparked by Fannie and Freddie as U.S. and European economies will remain weak.

Global equity rallies fueled by U.S. government action have petered out in the past. When the Federal Reserve cut its discount rate in August 2007, global stocks climbed for two months, only to have those gains wiped out by January. The process was repeated with the March bailout of Bear Stearns Cos., with the MSCI World Index advancing 13 percent in the following two months, before losing 19 percent by the end of last week.

``The relief package doesn't spell the end for falling home prices in the U.S.,'' said Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo. ``The government is now assuming the financial risk for Fannie and Freddie to the detriment of its own balance sheet.''

Chinese Banks

Bank shares also dropped in Hong Kong and China after Goldman, Sachs & Co. cut its recommendation on the industry to ``neutral'' from ``attractive,'' citing a weaker economy and the risk of more non-performing loans. Bank of Communications Ltd. fell 4.3 percent to HK$8.54, while China Citic Bank Ltd. declined 4.4 percent to HK$4.12 after both were lowered to ``sell.''

Compal slumped 6.9 percent, to NT$25.50, the lowest in five years. Shipments this year will be about 28 million to 29 million units, President Ray Chen said yesterday, compared with the company's earlier projection for 32 million.

In Indonesia, Astra Agro, the nation's largest publicly listed plantation company, plunged 11 percent to 14,250 rupiah, a one-year low. PT Perusahaan Perkebunan London Sumatra Indonesia, the second biggest, sank 9.2 percent to 4,450 rupiah.

Palm oil fell as much as 4.3 percent to 2,367 ringgit ($685) a ton in Malaysia today on concern declining crude-oil prices will cool demand for biofuel made from the commodity.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net