Asian Stocks Fall to Three-Year Low, Led by Toyota, Hang Seng

By Kyung Bok Cho and Ian C. Sayson

Oct. 2 (Bloomberg) -- Asian stocks fell, led by automakers and commodity producers, after U.S. car sales plunged the most in 17 years and the Senate's approval of a $700 billion rescue package failed to ease concern the global slowdown will worsen.

Toyota Motor Corp. and Honda Motor Co., Japan's two largest carmakers, slumped more than 4 percent. BHP Billiton Ltd. fell 2.5 percent after Merrill Lynch & Co. said iron-ore prices will rise less than forecast on faltering demand for steel. U.S. stock futures dropped 1.1 percent after the bailout was sent back for another vote in the House of Representatives, where lawmakers rejected an earlier version of the measure.

``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 1.9 percent to 106.94 as of 2:46 p.m. in Tokyo, set to close at its lowest level since October 2005 and taking this year's decline to 32 percent. Markets in Malaysia, Indonesia, India and Pakistan are shut for holidays today, while China is closed all week.

Japan's Nikkei 225 Stock Average declined 1.8 percent to 11,146.79. Komatsu Ltd. and Hitachi Construction Machinery Co., Asia's two largest excavator makers, led declines after U.S. manufacturing contracted more than forecast, stoking concern demand for their products may slow.

Bank Failures

Asian stocks tumbled this year as global economies slowed and institutions posted almost $600 billion in losses and writedowns. A surge in market volatility and a contraction in credit led to the failures of Lehman Brothers Holdings Inc. and Washington Mutual Inc., the sale of Merrill Lynch & Co. to Bank of America Corp., and the nationalization of American International Group Inc.

Hang Seng Bank Ltd., the city's second largest lender, tumbled the most in a decade after the city's second-largest lender by assets said it holds debt issued by WaMu.

The House's rejection of legislation designed to rescue U.S. financial companies sparked a record 778-point drop in the Dow Jones Industrial Average Sept. 29.

The financial crisis helped drag U.S. auto sales down 27 percent in September, the industry's worst month since 1991, after lenders toughened loan standards and consumers curbed spending. Toyota's U.S. sales dropped 32 percent, Honda's slipped 24 percent and Mazda Motor Corp. slumped 36 percent.

`Fearful'

Toyota lost 4.3 percent to 4,270 yen, while Honda declined 4.5 percent to 3,000 yen. Mazda, a third owned by Ford Motor Co., plunged 11 percent to 370 yen, its biggest intraday drop in seven years.

``In my adult lifetime I don't think I've ever seen people as fearful, economically, as they are right now,'' billionaire Warren Buffett said in an interview with PBS's Charlie Rose yesterday. ``They are not wrong to be worried.''

The Institute for Supply Management's factory index fell to 43.5 last month, the lowest level since October 2001, the Tempe, Arizona-based group reported yesterday. Komatsu lost 9.9 percent to 1,516 yen, while Hitachi fell 12 percent to 2,125.

The Bank of Japan may cut the nation's fiscal 2008 growth projection this month to about zero percent as a weaker global economy cuts demand for exports, the Nikkei newspaper said today.

BHP, the world's second-largest iron-ore producer, dropped 2.5 percent to A$31.94. Rio Tinto Group, the third largest, fell 3.1 percent to A$92.03. The two companies may win a 10 percent jump in contract prices for the material used in steelmaking, down from a previous estimate of 15 percent, Merrill analysts led by Vicky Binns said in a report dated yesterday.

The global slowdown has pared steel demand from builders and producers of cars and appliances, forcing mills to cut prices. Global steel production may decline, reducing demand for iron ore, Binns said.

Steelmakers, China Cosco

Nippon Steel Corp., the world's second-largest steelmaker, slid 7.7 percent to 360 yen in Tokyo. Posco, the third biggest in Asia, retreated 4.6 percent to 416,500 won in Seoul.

Fortescue Metals Group Ltd., seeking to become Australia's third-largest iron-ore producer, dropped 6.2 percent to A$4.98. JPMorgan Chase & Co. cut its price estimate by 48 percent to $5.41, citing concern the company may have difficulty funding a mine expansion.

China Cosco Holdings Co., the world's largest operator of iron-ore and coal ships, fell 5.4 percent to HK$6.50 in Hong Kong on slowing demand for raw-material shipments to China. That's the stock's seventh straight decline, its longest losing streak in almost 19 months.

Hang Seng Slumps

China's manufacturing activity contracted for a second month in September, a CLSA Asia-Pacific Markets survey of purchasing managers showed today. The CLSA index fell to the lowest since the survey began in April 2004.

Hang Seng Bank, a unit of HSBC Holdings Plc, fell 9.2 percent to HK$131.10. ``Hang Seng Bank has exposure to senior debt securities issued by Washington Mutual,'' the company said in an e-mailed statement to Bloomberg News. Concern about Hong Kong banks' investments in failed U.S. firms helped trigger a run on Bank of East Asia Ltd. last week.

Developers in Hong Kong fell after the city's banks increased mortgage rates as funding costs rose. Sun Hung Kai Properties Ltd., Hong Kong's No. 1 developer by market value, plunged 6.4 percent to HK$73.35. Sino Land Co. dropped 5.9 percent to HK$8.

BYD Co., China's biggest maker of rechargeable batteries, surged 19 percent to HK$15.40 in Hong Kong and subsidiary BYD Electronic (International) Co. rose 57 percent to HK$4. BYD has gained 83 percent this week after the company attracted a HK$1.8 billion ($232 million) investment from Buffett's MidAmerican Energy Holdings Co. BYD Electronic has more than doubled.

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.