Asia Stocks Post Biggest Weekly Drop in 13 Months; Toyota Falls

By Ian C. Sayson

Oct. 4 (Bloomberg) -- Asian stocks posted the biggest weekly drop in 13 months on concern a $700 billion U.S. bank bailout will fail to stimulate demand for the region's exports.

Toyota Motor Corp. fell 14 percent this week, the most in 21 years, after its U.S. car sales plunged 32 percent last month. BHP Billiton, the world's biggest miner, dropped 15 percent as commodity prices headed for their biggest weekly decline in 50 years. Babcock & Brown Ltd. paced a drop in financial stocks, sliding 20 percent, as borrowing costs increased.

``Investors are worried that economic conditions and earnings will still deteriorate even with this rescue plan,'' said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co. in Tokyo, which manages $3.3 billion. ``The weakening global demand is becoming more of a concern to many investors.''

The MSCI Asia Pacific Index dropped 8.0 percent this week, the most since the five days ended Aug. 17, 2007, when credit markets first seized up as the U.S. subprime mortgage crisis prompted banks to rein in lending. The index has slumped 33 percent this year as the credit crunch brought down banks including Lehman Brothers Holdings Inc.

The index tumbled 3.9 percent on Sept. 30 after the U.S. House of Representatives blocked the first passage of the rescue plan.

A measure of commodity producers tumbled 14.9 percent, the most since at least 1995, when Bloomberg data on the index was first compiled. All 10 industry groups declined.

Toyota, the world's No. 2 carmaker, fell 14 percent this week to 4,080 yen, its biggest loss since October 1987. The company said it offered no-interest loans on 11 models in the U.S., where its sales tanked the most in 21 years.

The financial crisis may push the U.S. into a recession, the International Monetary Fund said this week, after predicting a moderate contraction in July. First-time jobless claims in the U.S. surged to a seven-year high in the week ended Sept. 27 while factory bookings fell the most in two years in August, according to government data.

``We know that there's a financial crisis, and now the question is are we going to have an economic correction or crisis,'' said Masayuki Kubota, a senior fund manager at Daiwa SB Investments Ltd. in Tokyo, who helps oversee $1.7 billion. ``If it does turn into a crisis, there is a lot of downside for equity markets.''

BHP Billiton dropped 15 percent to A$30.42, the most since October 1987 on concern demand for raw materials will weaken. Mitsubishi Corp., which generates more than half of its profit from commodities trading, fell 21 percent to 1,938 yen, its biggest loss based on data that goes back until September 1974.

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have fallen 10.9 percent this week, the largest drop since at least 1956 on concern that demand will weaken as global economic growth slows. Crude oil has lost 12.2 percent to $93.88 a barrel, its worst performance since the week ending Dec. 3, 2004.

Babcock, Orix

Babcock & Brown, a manager of infrastructure assets, fell 20 percent to A$1.84 on concern that the global credit crisis will choke financing. Orix Corp., which has debt equal to three times its equity, plunged 24 percent to 10,690 yen, its sharpest retreat since January 2000.

Banks in Singapore are charging each other three-month U.S. dollar loans at 4.27 percent, the highest since Jan. 11. Hong Kong's interbank offered rate for similar-term loans in the city's currency climbed to 3.81 percent, the highest since Dec. 10.

Hang Seng Bank Ltd., Hong Kong's second-biggest bank by assets, fell 17 percent to HK$123.70, its biggest loss since April 1988, after saying it holds debt issued by Washington Mutual Inc., which collapsed last week.

Sun Hung Kai Properties Ltd., Hong Kong's No. 1 developer by market value, lost 13.4 percent to HK$74, the most since September 2001, on concern real estate purchases will weaken after banks including HSBC Holdings Plc raised the cost of mortgages in the city.

BYD Co., the biggest gainer on MSCI's Asian index, jumped 64 percent to HK$13.78. China's largest rechargeable-battery maker surged after billionaire Warren Buffett's MidAmerican Energy Holdings Co. said it will buy a 9.9 percent stake for HK$1.8 billion ($232 million).

``It's a good time to pick up value stocks, those with steady cashflows, high dividend yields and good earnings visibility,'' said Masahiko Ejiri, who helps manage about $30 billion at Mizuho Asset Management Co. in Tokyo. ``I am sure the U.S. knows the gravity of the situation and a plan will be reached to save their financial institutions.''

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net