Asian Stocks Drop for Second Day, Led by Materials Producers

By Kyung Bok Cho and Ian C. Sayson

Sept. 10 (Bloomberg) -- Asian stocks fell for a second day, led by materials and shipping companies, after metals prices declined and cargo rates slumped on concern slowing global growth will curb demand for resources.

BHP Billiton Ltd., the world's largest mining company, and Mitsubishi Corp. dropped more than 2 percent. China Cosco Holdings Co., the world's largest operator of dry-bulk ships, tumbled 13 percent. Banks gained after Yonhap News reported that Korea Development Bank is seeking to buy a stake in Lehman Brothers Holdings Inc. KDB said later it had ended the talks.

``This is not a good time to make new investments in risky assets like stocks,'' said Hiroshi Morikawa, senior strategist at Japan's MU Investments Co., which manages about $14 billion. ``I will keep my money in cash or bonds because of the uncertainties in the global economy. I prefer to stay in a safe harbor.''

The MSCI Asia Pacific Index fell 0.6 percent to 118.00 as of 5:15 p.m. in Tokyo, extending yesterday's 2.2 percent loss. The measure has plunged 25 percent this year as global financial companies posted credit-market related losses and writedowns in excess of $500 billion.

Japan's Nikkei 225 Stock Average lost 0.4 percent to 12,346.63. Nippon Electric Glass Co., the world's third-biggest maker of glass for flat-panel televisions, slumped 12 percent on speculation demand will decline.

China's CSI 300 Index added 0.2 percent, paring earlier losses of as much as 1.9 percent after inflation cooled last month to the slowest pace in a year. All other benchmark indexes in the region fell apart from South Korea, Taiwan and Pakistan.

Metals Decline

U.S. stocks slumped yesterday, with the Standard & Poor's 500 Index falling 3.4 percent, the most since February 2007. In the previous session, the measure gained the most in a month after the government's takeover of Fannie Mae and Freddie Mac. S&P 500 futures were up 0.8 percent recently.

In Asia, an index of materials producers fell 2.9 percent to the lowest since October 2006.

BHP dropped 3.5 percent to A$34.80 in Sydney, the lowest since March 25. Korea Zinc Co., the world's second-biggest zinc refiner, lost 4.2 percent to 115,500 won. Mitsubishi, a Japanese trading company that gets half its profit from commodities, fell 2.7 percent to 2,520 yen, the lowest since Jan. 24.

A measure of six metals traded on the London Metal Exchange, including zinc, declined 2 percent to 3,272.8 yesterday, the lowest since June 27, 2006.

Zijin Mining Group Co., which owns China's largest gold mine, lost 9.3 percent to HK$3.89 in Hong Kong, the lowest since March 20, 2007, after gold fell 2 percent yesterday in Singapore.

Shipping Rates

China Cosco plunged 13 percent to HK$10.18 in Hong Kong, extending yesterday's 7.6 percent decline. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, fell 2.6 percent to 1,051 yen, the lowest since Dec. 1, 2006.

The Baltic Dry Index, a measure of commodity-shipping costs, tumbled to its lowest in 15 months yesterday, extending its decline from a May 20 record to 55 percent.

Signs of a slowing global economy have damped demand for commodities. The U.K. economy is contracting for the first time in at least a decade, the National Institute for Economic and Social Research said today. The European Union will cut its own growth forecast this week as confidence wanes and inflation expectations increase, EU Commissioner Joaquin Almunia said yesterday.

``It's hard to tell at the moment just how deep the global economic downturn is going to get,'' said Hideo Arimura, who overseas the equivalent $1.9 billion at Mizuho Asset Management Co. in Tokyo. ``Europe is in the most precarious position and its weakness is going to be a drag for other economies.''

Economic Slowdown

Nippon Electric Glass fell 12 percent to 1,105 yen, the lowest close since July 2005. The stock was the second-biggest loser among 1,737 members on the MSCI World Index. Asahi Glass Co., which gets a quarter of its sales in Europe, declined 2.7 percent to 1,019 yen, the lowest since Nov. 10, 2004. Canon Inc., which counts Europe and the U.S. as its biggest markets, lost 3.9 percent to 4,460 yen, the lowest since March 18.

Mitsubishi UFJ Financial Group Inc., Japan's biggest bank, added 3.2 percent to 867 yen, the highest since Aug. 12. Sumitomo Mitsui Financial Group Inc., the second-largest by market value, advanced 3.2 percent to 681,000 yen.

Korea Development Bank is in talks to buy more than 25 percent of Lehman for about $6 billion, Yonhap reported, citing a executive at the Korean bank it didn't name.

Following the report, KDB said in an e-mailed statement that it has ``ended the negotiations as there's differences over the terms of the deal and considering financial market conditions at home and overseas.''

`Strategic Initiatives'

``The feeling has been that the story of Lehman is headed for a resolution, so investors have been anticipating some kind of news to break,'' said Mitsushige Akino, who oversees about $468 million at Ichiyoshi Investment Management Co. in Tokyo.

Lehman said it will announce ``key strategic initiatives'' and third-quarter results today in the U.S., a week earlier than planned.

Hynix Semiconductor Inc., the world's second-largest computer-memory maker, added 8.1 percent to 20,100 won in Seoul. The company said today it will cut output of NAND flash chips by as much as 30 percent this month after a glut drove down prices. Separately, main creditor Korea Exchange Bank said yesterday it will ask other banks to revive talks on selling their combined 36 percent controlling stake in Hynix.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.