Asian Stocks Fall, Set for Worst Week on Record; Banks Plunge

By Kyung Bok Cho

Oct. 10 (Bloomberg) -- Asian stocks fell, with the region's benchmark index headed for its worst week on record as a credit freeze deepened, worsening the outlook for the global economy.

Commonwealth Bank of Australia slumped 5.5 percent after higher borrowing costs showed interest-rate cuts by global central banks have failed to encourage banks to lend. Yesterday in the U.S., the Dow Jones Industrial Average fell below 9,000 for the first time since 2003. BHP Billiton Ltd. lost 7.2 percent after crude oil declined to the lowest in a year.

``Investors are pricing in a reasonably significant and protracted recession,'' said Troy Angus, who helps manage $3.1 billion at Paradise Investment Management in Sydney. ``The market's anticipating corporate earnings in Australia to go down 20 percent at least.''

Japan's Nikkei 225 Stock Average plunged 4.5 percent to 8,742.48, set for the lowest since June 2003. Australian shares headed for their worst week since the 1987 stock market crash. South Korea's Kospi index fell to its lowest since June 23, 2006, while a plunge in futures triggered a halt in program trading.

The MSCI Asia Pacific Index lost 1.5 percent to 90.92 as of 9:28 a.m. in Tokyo. The measure is headed for a 12 percent weekly decline, the worst since the index was created on Dec. 31, 1987.

The regional benchmark dropped 42 percent this year as mounting mortgage-related losses at financial firms caused credit to dry up, toppling banks including Lehman Brothers Holdings Inc. and slowing global demand for Asia's exports.

U.S. stocks tumbled yesterday, wiping out almost $900 billion in market value. The Standard & Poor's 500 Index slid 7.6 percent to 909.92, capping a seven-day decline, the longest losing streak since 1996. S&P 500 index future slipped 0.2 percent recently in after-hours trading.

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