Asian Stocks Plunge on Credit Concern; Nikkei Average Tumbles

By Chua Kong Ho and Rebecca Keenan

Oct. 8 (Bloomberg) -- Asian stocks tumbled, driving the Nikkei 225 Stock Average to its biggest drop since October 1987, and U.S. futures fell on concern the credit crisis will topple more banks and slowing growth will cut demand for exports.

Indonesia halted stock trading after the benchmark index tumbled 10 percent. Mitsubishi UFJ Financial Group Inc. dropped 5.9 percent as the International Monetary Fund said institutions may need $675 billion in fresh capital and as the cost of protecting Asia-Pacific bonds from default climbed. Toyota Motor Corp. slumped 12 percent after Nikkei English News said profit may drop and after the dollar slumped versus the yen.

``It is capitulation,'' said Hans Kunnen, head of investment market research at Colonial First State Global Management, which manages $128 billion. ``It is across-the-board fear that economic conditions will get seriously worse.''

The MSCI Asia Pacific Index fell 7 percent to 91.79 as of 3:20 p.m. in Tokyo, bringing its decline this year to 42 percent. The measure is set for its lowest close since April 2, 1990, when Japan's asset bubble was deflating. Financial stocks contributed the most to the index's drop.

Japan's Nikkei 225 Stock Average lost 9.4 percent to 9,203.32, the biggest plunge since global markets crashed in October 1987. The Hang Seng slumped 5.6 percent as Hong Kong's monetary authority cut interest rates in an effort to keep the credit crisis from spreading.

Australia's S&P/ASX 200 Index declined 5 percent as consumer confidence fell the most in two years. Shares dropped across Asia, extending a global sell-off that has wiped out more than $5 trillion of market value in the past week.

Global Rout

Indonesia's trading halt, the first since September 2002 when a bomb blast at the stock exchange killed 15 people, is the latest official measure to stem the stock-market rout.

Australia's central bank yesterday cut interest rates by the most since 1992, while Federal Reserve Chairman Ben S. Bernanke signaled he's also ready to reduce borrowing costs. The U.K. is preparing a rescue package for British banks which includes cash injections, people familiar with the plan said.

The efforts have done little to assuage concerns that the credit crisis will claim more institutions. Standard & Poor's 500 futures dropped 2.2 percent today. Financial companies dragged the index down by 5.7 percent yesterday.

``The panic selling continues,'' said Yoo Byung Ok, who oversees the equivalent of $3 billion at Mirae Asset Investments Co. in Seoul. ``The plans for propping up the markets aren't having an effect.''

Lower Growth Forecast

The cost of protecting bonds from default increased, with the Markit iTraxx Japan index of credit-default swaps rising 7.5 basis points to 201.5, according to prices from Credit Suisse Group. The dollar dipped below 100 against the yen for the first time since April 1. Treasuries were little changed, with yields near a three-week low.

Mitsubishi UFJ, Japan's biggest bank, slumped 5.9 percent to 763 yen. National Australia Bank Ltd., the nation's largest bank, sank 6.4 percent to A$24.35.

The IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.

`Nowhere To Hide'

``We are talking about a global recession in the offing,'' said Jason Chong, who oversees $1.6 billion as chief investment officer at UOB-OSK Asset Management in Kuala Lumpur. ``There's really nowhere to hide as far as investing is concerned.''

HSBC Holdings Plc, Europe's largest bank, dropped 2.6 percent to HK$117.40 in Hong Kong. The base rate for banks in the city will drop to 2.5 percent from 3.5 percent tomorrow, based on the U.S. benchmark target rate plus 50 basis points, the Hong Kong Monetary Authority said today.

Toyota, the world's second-largest automaker, fell 6.7 percent to 3,460 yen. Operating profit may drop 40 percent to about 1.3 trillion yen ($12.8 billion), or 300 billion yen less than the company projected, the Nikkei newspaper said.

Honda Motor dropped 6.2 percent to 2,410 yen. Isuzu Motors Ltd., Japan's largest maker of light-duty trucks, plunged 11 percent to 199 yen.

Commodities Slump

UBS AG reduced its estimate for sales growth at Japanese companies to 2 percent from 5 percent and predicted recurring profit will decline 12.8 percent due to the global slowdown. Goldman, Sachs & Co. cut its estimate for Japan's growth next year to 0.5 percent from 1.3 percent.

Alumina Ltd., which owns a mining venture with Alcoa Inc., tumbled 16 percent to A$2.50 in Sydney, the most since January 2008. Alcoa reported a worse-than-expected earnings and cut its forecast for aluminum demand growth.

Resources stocks also fell as oil and metals prices declined on concern demand will slow. BHP Billiton Ltd., the world's largest mining company, declined 5.7 percent to A$29.90. Rio Tinto Group fell 7.6 percent to A$81.12. Cnooc Ltd., China's largest offshore oil explorer, fell 12 percent to HK$6.65.

Oil futures in New York declined as much as 1.2 percent in after-hours trading. Futures have declined 39 percent from their July 11 record. Copper on the London Metal Exchange slumped 4.4 percent in Asian trading hours.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net.