Asian Stocks Retreat for Seventh Week in Eight on Weak Profits

By Patrick Rial and Satoshi Kawano

Oct. 25 (Bloomberg) -- Asian stocks dropped for the seventh week in eight, sending the region's benchmark index to the lowest level since 2004, on signs profits are declining as the credit crisis worsens.

Sony Corp., maker of the Playstation2 game console, slumped 19 percent to the lowest in 13 years after slashing its profit forecast on weaker demand for electronics and the surging yen. Samsung Electronics Co. led South Korea's Kospi Index to its biggest weekly drop in at least two decades after its profit tumbled and as the government stepped up measures to shore up the nation's financial system. Newcrest Mining Ltd., Australia's largest gold producer, led a drop by commodities producers as oil, gold and copper all recorded new lows for the year.

``Financial markets have crashed and are out of control,'' said Yuji Ogino, an executive director at Meiji Dresdner Asset Management Co., which manages the equivalent of $28 billion in Tokyo. ``This crash is different from anything I've experienced since getting into this business in the late 1980s and it's hard to find ways to ride out the situation.''

The MSCI Asia Pacific Index lost 7.9 percent to 80.40 this week, bringing the index to its lowest close since May 2004. Measures of commodity and electronics companies posted the steepest declines among the index's 10 industry groups as only utilities recorded gains.

The MSCI gauge has lost 49 percent this year and is on track for its worst annual performance since it was created in 1987. About half the value of global equities has been erased in the last year, with almost $30 trillion in value lost.

South Korea, Japan


Japan's Nikkei 225 Stock Average dropped 12 percent to 7,649.08, bringing it less than 50 points away from a level last seen in 1982. The yen soared to as high as 90.93 versus the dollar as investors sought a safe haven from the financial crisis, which conversely exacerbated losses by exporters dependent on overseas sales for their profit.

Sony dropped 19 percent to 1,972 yen, the lowest since June 1995. The consumer electronic giant slashed its full-year profit forecast by 58 percent as digital camera and television sales are likely to miss previous estimates.

Samsung retreated 19 percent to 407,500 won. Third-quarter net income declined 44 percent to the lowest level since 2003 and the company abandoned a takeover bid for memory maker SanDisk Corp.

South Korea's Kospi index sank 20 percent as the government proposed a $130 billion bailout package for the nation's banks after Standard & Poor's said it may cut their credit ratings.

Singapore Telecommunications Ltd. fell 18 percent to S$2.06 after announcing job cuts and as partners withdrew from a SingTel-led group bidding to build Australia's national high- speed Internet network.

Hedge Funds Redemptions?

Shares also dropped amid speculation hedge funds are being forced to sell shares as clients put in redemption requests amid losses. Hedge funds worldwide posted an average monthly loss of 4.7 percent in September, a record, according to Eurekahedge Pte.

``Investors are fleeing risky assets,'' said Paul Joseph Garcia, who helps manage $1.33 billion as chief investment officer at ING Investment Management Ltd.'s Manila unit. ``After the hedge funds, long-term funds are now taking their turn and pulling money off the table to meet redemptions.''

Newcrest slumped 23 percent to A$17.45. Inpex Corp., Japan's biggest oil explorer, retreated 14 percent to 518,000 yen. Posco, Asia's third-largest steelmaker, lost 20 percent to 242,000 won as the company announced production cuts due to weakening steel demand.

Crude oil for November delivery dropped as low as $62.65 this week, down by more than half from a July record. Gold futures slumped to the lowest in more than a year, while copper prices retreated for the fifth time in six weeks.

Citic Pacific Ltd. lost 65 percent to HK$5.06 after saying it may have lost about $2 billion on wrong-way currency bets and its debt ratings were cut.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net.