Asian Stocks Decline as Rio Takeover Derailed, Loan Rates Rise

By Patrick Rial and Masaki Kondo

Nov. 26 (Bloomberg) -- Asian stocks fell as credit market turmoil derailed BHP Billiton Ltd.’s $66 billion takeover of Rio Tinto Group and pushed U.S. dollar borrowing costs higher.

Rio Tinto, the world’s third-largest mining company, slumped 35 percent, the most in more than two decades, while BHP advanced. Fukuoka Financial Group Inc., Japan’s largest regional lender, lost 4.4 percent after dollar lending costs rose for a third day. Toyota Motor Corp. lost 3.2 percent after the Nikkei newspaper said the carmaker will slash production in France by 20 percent and Fitch Ratings cut the company’s rating to AA from AAA.

The MSCI Asia Pacific Index fell 0.8 percent to 79.39 as of 9:22 a.m. in Tokyo. That snapped yesterday’s 4.1 percent rally, the biggest in three weeks, fueled by a surge in commodity prices and the U.S. government’s rescue of Citigroup Inc.

“Investor sentiment is drifting between optimism about U.S. policies and pessimism about the market outlook,” Hiroichi Nishi, a Tokyo-based equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. “With shares priced below book value, we’ll see some bargain-hunting.”

Japan’s Nikkei 225 Stock Average lost 1.5 percent to 8,201.71. Panasonic Corp. slid 2.9 percent after the Nikkei newspaper said Goldman Sachs Group Inc. opposed its bid for Sanyo Electric Co.

Rio led declines in Australia. Shares in South Korea jumped.

U.S. stocks advanced for a third day yesterday. The Standard & Poor’s 500 Index swung between gains and losses more than 20 times before closing 0.7 percent higher. Futures on the index lost 0.4 percent in trading today.

Takeover Bid Ended

More than half of stocks in Asia have sunk below their book value as the collapse of the U.S. housing market curbed consumer spending on Asian-made goods and reduced demand for fuel and other commodities. The MSCI Asia Pacific Index has tumbled by 49 percent this year as the global economy slipped into recession.

BHP yesterday scrapped its takeover offer for Rio saying the move would have increased the company’s debt load and as seizure in credit markets and a global recession has led to slumping commodity prices.

South Korea’s Posco, Asia’s third-largest steelmaker, rose 2.4 percent. The merger would have raised iron ore prices, the steelmaker had said.

The London interbank offered rate, or Libor, for three-month dollar loans climbed for a third day yesterday, to 2.20 percent, according to the British Bankers’ Association’s. The increase occurred in spite of new facilities designed to unlock credit markets, indicating government efforts may be failing.

To unfreeze credit for homebuyers, the Federal Reserve will purchase as much as $600 billion of debt issued or backed by government-chartered housing-finance companies, the central bank said in statements yesterday. It will also establish a $200 billion program to shore up consumer and small-business loans.

House Prices

The S&P/Case-Shiller home-price index tumbled 17.4 percent in September from a year earlier, the fastest pace on record, as rising foreclosures in the U.S. pushed down property values. The collapse of the U.S. mortgage market has claimed Bear Stearns Cos and Lehman Brothers Holdings Inc. while costing global financial companies almost $1 trillion on credit losses and writedowns.

Crude oil for January delivery declined 6.8 percent to close at $50.77 a barrel in New York on speculation a U.S. government report will show inventories climbed last week. Futures have dropped 66 percent since reaching a record $147.27 on July 11.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.