By Chua Kong Ho
Oct. 7 (Bloomberg) -- Asian stocks fell on concern surging credit costs will deepen a global slowdown. Shares pared losses and U.S. futures gained after an Australian interest-rate cut spurred speculation more central banks will follow.
Toyota Motor Corp. slumped 4.6 percent, losing its spot as the world's largest automaker by value to Volkswagen AG, on concern car demand will decline. Sharp Corp., Japan's largest mobile phone and liquid-crystal display maker, tumbled 8.8 percent after cutting its profit forecast. Australia's benchmark index rallied from an earlier loss after the central bank cut interest rates by the most since 1992.
``I'm shocked by the speed at which the global economy has deteriorated,'' said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management, which oversees about $20 billion. ``The last bullet that central banks have is to lower interest rates. If that does not work, I really don't know what will happen.''
The MSCI Asia Pacific Index fell 1.1 percent to 99.32 as of 3:51 p.m. in Tokyo, paring a 3.2 percent loss. Industrial shares and companies reliant on consumer spending contributed the most to the decline. The drop followed a rout that wiped more than $2 trillion from global markets yesterday, sending the Dow Jones Industrial Average to its first close below 10,000 since 2004. Standard & Poor's 500 Index futures gained 1.4 percent today.
Japan's Nikkei 225 Stock Average lost 3 percent to 10,155.90, the lowest since Dec. 18, 2003. Thailand's SET Index sank 2.6 percent as protestors blocked government access to parliament. Hong Kong is closed for a holiday.
Central Bank Support
Governments across Asia are acting to unlock credit markets after U.S. and European bank failures sent money-market rates to record highs. The London interbank offered rate, or Libor, that banks charge each other for three-month dollar stayed near a nine-month high, the British Bankers' Association said. The Japanese Libor-OIS spread, a gauge of cash scarcity among banks, rose to a record.
India's central bank said yesterday it will allow lenders to set aside smaller reserves to add cash to the financial system. The Reserve Bank of Australia and the Bank of Japan today injected more than $11 billion.
The Australian central bank lowered its overnight cash rate target to 6 percent from 7 percent, double the half-point forecast by economists in a Bloomberg News survey.
`Something Special'
The S&P/ASX 200 Index gained 1.7 percent, erasing a 3.3 percent loss. Commonwealth Bank of Australia Ltd., the country's largest bank by value, rose 2.6 percent to A$45.15, reversing a 3 percent loss. Westpac Banking Corp., the second-largest, added 3.4 percent to A$23.27, rebounding from a 2.2 percent loss.
``The RBA needed to do something special, and they've done it,'' said Simon Bonouvrie, a portfolio manager who helps manage $1.8 billion at Platypus Asset Management in Sydney. ``There's some talk around in the market that there could be a coordinated global interest-rate cut tonight and that the RBA is preempting that.''
MSCI's Asia Pacific index tumbled 22 percent in the third quarter as the credit crisis forced Lehman Brothers Holdings Inc. to file for bankruptcy and governments to seize Fannie Mae, Freddie Mac and the U.K.'s Bradford & Bingley Plc.
Today's drop took the valuation of the Asia Pacific index to 11.5 times estimated profit. That's compared with the S&P 500's 12.6 times and the Dow Jones Stoxx 600 Index's 9.1 times.
Toyota, which makes almost 80 percent of its sales outside Japan, dropped 4.9 percent to 3,710 yen. Honda Motor Co. slid 5 percent to 2,570 yen. Mazda Motor Corp., which derives more than half its profit from Europe, dived 5.9 percent to 320 yen.
Slowing Demand
Auto sales fell 27 percent in the U.S. last month as tightening credit and an economic slowdown discouraged buyers, prompting Toyota to offer no-interest loans. In Europe, sales slid 16 percent in August, the biggest monthly drop in nine years.
The International Monetary Fund will cut its global economic-growth forecast ``pretty significantly'' this month as the financial crisis throttles lending, Managing Director Dominique Strauss-Kahn said Oct. 4. The IMF is due to release updated forecasts next week. In July, it estimated global growth of 4.1 percent for 2008 and 3.9 percent in 2009.
Sharp tumbled 9.3 percent to 910 yen, the most since March 2000, after the company said profit will probably drop 41 percent to 60 billion yen ($591 million) for the year ending March 31, less than the previous forecast of 105 billion yen.
Asset Managers Holdings Co. tumbled 11 percent to 8,230 yen, after the Tokyo-based real estate investment company said it will delay payment for land it bought from the Tokyo Metropolitan Government by two months.
Aluminum Corp. of China Ltd., the country's largest producer of the metal, fell 3.7 percent to 8.29 yuan in Shanghai, extending yesterday's 7.1 percent decline. Third-quarter profit will slump by more than half due to higher raw-material costs and slowing demand, the company said.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg; Shani Raja in Sydney at sraja4@bloomberg.net.
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