Asian Stocks Plunge as Credit Crisis Deepens; Banks, BHP Slump

By Kyung Bok Cho and Chua Kong Ho

Oct. 10 (Bloomberg) -- Asian stocks tumbled, driving Japan's Nikkei 225 Stock Average and Hong Kong's Hang Seng Index to more than 9 percent declines, on concern the deepening credit crisis will push the global economy into recession.

ICICI Bank Ltd., the Indian bank that's reported the biggest losses on overseas investments, sank 26 percent. Mitsubishi UFJ Financial Group Inc. plunged 8.5 percent after Moody's Investors Service said it may cut Morgan Stanley's credit rating. Neptune Orient Lines Ltd. fell 11 percent on concern the region's exports will slow. BHP Billiton Ltd., the world's biggest mining company, lost 7 percent after commodities slumped. Indonesia's stock exchange suspended trading for a third day.

``It's pure panic,'' said Ivan Tham, Singapore-based head of funds management at state-backed Kuwait Finance House, which has about $24 billion in assets. ``You're seeing companies start to fail because they can't refinance. Good companies are being sold down aggressively with the bad.''

The MSCI Asia Pacific Index lost 6.5 percent to 86.32 as of 4:59 p.m. in Tokyo. The measure is poised to drop 17 percent this week, the biggest slump since the index was created on Dec. 31, 1987. Twenty-five stocks fell for each that rose. The index, down 45 percent this year, now trades at 10 times estimated earnings, compared with 10.9 for the S&P 500. Standard & Poor's 500 Index futures lost 1.9 percent.

The yen gained 1.1 percent to 98.76 per dollar as investors cut holdings of higher-yielding assets funded in the Japanese currency.

All Asian benchmark indexes dropped. Japan's Nikkei plunged 9.6 percent to 8,276.43, led by financial companies, after the failure of a real-estate investment trust and an insurer. Hong Kong's Hang Seng Index lost 9.6 percent as HSBC Holdings Plc slid.

Trading Halt

Australia's S&P/ASX 200 Index tumbled 8.3 percent, the most since the October 1987 crash, led by National Australia Bank Ltd. Thailand's SET Index plummeted 10 percent, triggering a 30 minute trading halt. Taiwan is closed for a holiday.

More than $6 trillion has been erased from global equities this week even as central banks from London and Frankfurt to Washington and Hong Kong were forced to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.

``The 1987 crash was over in a day or two, but this one is like a death by a thousand cuts,'' said Brian Ingham, a fund manager at Sydney-based Nucleus Global Investors, which invests in global utility and infrastructure stocks. ``We've now entered the point of unreality where I'm almost immune to what I'm seeing.''

Bank Losses

U.S. stocks tumbled yesterday, with the Dow Jones Industrial Average closing below 9,000 for the first time since 2003. Morgan Stanley tumbled 26 percent, while Goldman Sachs fell 10 percent. They were the biggest U.S. securities firms before they became bank holding companies last month.

ICICI Bank fell by 26 percent to 334.80 rupees, the most since its trading debut in September 1997. Joint Managing Director Chanda Kochhar told reporters the bank has ``sufficient liquidity.''

Mitsubishi UFJ, Japan's biggest bank, lost 8.5 percent to 710 yen, capping a 20 percent decline this week. The company is in talks to buy a stake in Morgan Stanley. Sumitomo Mitsui Financial Group Inc., Japan's second-largest bank by market value, fell 8.2 percent to 552,000 yen.

Moody's put Morgan Stanley's A1 long-term credit rating on review for a possible downgrade, according to an e-mailed statement. The ratings assessor also said it cut its outlook for Goldman Sachs Group Inc.'s Aa3 long-term rating to negative.

Lending Rates

National Australia, the nation's biggest bank, slid 12 percent to A$20.80. HSBC, the largest in Europe, dropped 8.2 percent to HK$108.30 in Hong Kong, set for its steepest decline since the September 2001 terror attacks.

Money markets rates continued to rise even after a raft of cuts in borrowing costs by global central banks. The London interbank offered rate, or Libor, for three-month loans rose to 4.75 percent yesterday, the highest level since Dec. 28.

Japan's overnight call rate climbed 18 basis points, or 0.18 percentage point, to 0.72 percent, headed for the highest close since March 2007. Hong Kong's three-month interbank offered rate climbed 1 basis point to 4.41 percent, the highest since Oct. 31 last year.

``It's a financial panic,'' said Choi Min Jai, who oversees the equivalent of $2.1 billion at KTB Asset Management Co. in Seoul. ``The recession can only get worse.''

Mitsubishi Estate Co., Japan's second-biggest real-estate company, lost 8.1 percent to 1,642 yen. Mitsui Fudosan Co., the largest, slipped 6.8 percent to 1,575 yen. T&D Holdings Inc., the country's largest publicly traded life insurer, dropped 11 percent to 4,220 yen.

Companies Fail

New City Residence, a Tokyo-based real-estate investment trust, filed for credit protection, while Yamato Life Insurance Co. became the nation's first bankruptcy in the industry in seven years.

Neptune Orient tumbled 11 percent to S$1.58, the steepest decline since Nov. 11, 2003. STX Pan Ocean Co., South Korea's largest bulk-shipping line, declined 17 percent to S$1.12 in Singapore. Mitsui O.S.K. Lines Ltd., operator of Japan's largest fleet of iron-ore carriers, fell 7.8 percent to 577 yen.

The Baltic Dry Index, a measure of commodity-shipping rates, dropped 9.4 percent yesterday in London, bringing this year's plunge to 73 percent.

BHP, Australia's largest oil producer, slid 7 percent to A$27.74. Rio Tinto Group, the world's third-largest miner, dropped 6.4 percent to A$73.

Commodities Slump

Crude oil tumbled as much as $4.52 a barrel to $82.07, headed for its biggest weekly decline since December 2004, pacing a slump in commodities. Oil in New York fell to the lowest in a year and copper traded at its lowest since March 2006.

The risk of Australian companies defaulting on their debt rose to a record. The Markit iTraxx Australia index of credit- default swaps climbed 47 basis points to 2.70 percentage points, according to Credit Suisse Group AG data. Credit-default swaps, contracts to protect against or speculate on default, pay the buyer face value if a company fails to adhere to its debt agreements.

The yen has risen 6 percent this week against the dollar and today touched 97.92, the strongest since March 19. Japan's currency was at 134.49 versus the euro from 145.11 on Oct. 3, heading for the largest weekly gain since the single currency's creation in 1999. Against the Australian dollar, the yen traded at 65.88, on course for a 24 percent gain this week.

`Buy Yen'

Group of Seven finance ministers and central bankers meet today and tomorrow in Washington to discuss financial turmoil that has already led to interest-rate cuts and bank bailouts in most of the member nations.

``The basic trend is to buy the yen,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``The credit crunch is spreading from the financial sector to other companies, meaning currency traders can't take on risk. The G-7 may not be able to repair money markets quickly enough.''

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.