Australia Stocks Slump to 3-Year Low on Credit, Recession Fears

By Shani Raja

Oct. 6 (Bloomberg) -- Australian stocks fell, dragging the benchmark index to the lowest in almost three years, on concern the credit crisis will slow global growth and curb demand for raw materials as it spreads to Europe.

National Australia Bank Ltd., the nation's largest lender, dropped 2.3 percent and Babcock & Brown Ltd., a manager of infrastructure assets, slumped 13 percent, leading declines among financial companies. Hypo Real Estate Holding AG required a rescue by the German government, while BNP Paribas SA agreed to take control of Fortis's units in Belgium and Luxembourg.

The S&P/ASX 200 Index fell 3.3 percent to 4,540.40 at the close in Sydney, the lowest since Nov. 9, 2005. A measure of financial companies accounted for 37 percent of the drop. The main index has declined 28 percent this year as credit markets seized up in the wake of the U.S. subprime mortgage crisis.

``It's been clearly shown in the past week or two that the issues aren't just confined to the U.S.,'' said Paul Xiradis, who manages the equivalent of $11 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. ``It's going to take some time to unclog the credit market.''

Mining stocks declined on concern looming recessions in the U.S., Europe and parts of Asia will cut raw-material demand and prices. Rio Tinto Group dropped 5 percent to A$84.48, the lowest in more than a year. Felix Resources Ltd., an Australian coal producer, slumped 16 percent to A$13.76, the most since March, while Gloucester Coal Ltd. tumbled 14 percent to A$5.52, the index's fifth-worst performer.

German Banks

Germany and the nation's banks and insurers agreed on a 50 billion euro ($68 billion) support package for commercial property lender Hypo, which reported a 95 percent plunge in second-quarter profit due to debt-related writedowns. BNP Paribas SA, France's biggest lender, will pay 8.25 billion euros to purchase Fortis's Belgium bank after government support measures failed.

U.S. stocks declined the most last week since the September 2001 terrorist attacks. Concern that tightening credit markets will prolong an economic slowdown overshadowed the passage of a $700 billion financial-market rescue package.

National Australia Bank fell 2.3 percent to A$25.55, the most in almost a week. Babcock & Brown plunged 13 percent to A$1.61, the lowest in almost two weeks.

The following companies rose or fell on the Australian stock exchange today.

Newcrest Mining Ltd. (NCM AU), Australia's largest gold producer, declined A$1.15, or 4.2 percent, to A$26.44, the lowest since Sept. 22. Gold futures for December delivery fell 1.3 percent to $833.20 an ounce in New York on Oct. 3. The metal lost 6.2 percent last week.

Platinum Australia Ltd. (PLA AU), which owns mines in South Africa and Australia, slumped 10 cents, or 7.2 percent, to A$1.35, the lowest since March 21, 2007. The price of the metal fell, capping the biggest weekly drop in 22 years, on concern auto sales in emerging markets will falter, further reducing demand for the metal used in car parts.

Suncorp-Metway Ltd. (SUN AU), Australia's third-largest general insurer, surged 40 cents, or 3.8 percent, to A$11.08, the highest since Sept. 8. Suncorp said it has been approached by companies wanting to buy its banking and wealth management units.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net