Asian Stocks Fall for Second Week as Global Recession Deepens

By Chua Kong Ho

Nov. 22 (Bloomberg) -- Asian stocks fell for a second week, led by financial companies and commodity producers, as a global recession and plunge in oil prices heightened concern demand and profits will be hurt.

Tokio Marine Holdings Inc. slumped 36 percent after Japan’s biggest insurers slashed their profit forecasts. Woodside Petroleum Ltd. fell to the lowest since July 2005 as oil dipped below $50 a barrel. Babcock & Brown Ltd. plunged 48 percent as it sought to resolve a dispute with one of its bankers. PT Bumi Resources tumbled 39 percent as investors who borrowed to buy the stock of the Indonesian coal producer sold to cover losses. Oz Minerals Ltd. plunged 32 percent after saying lower metal prices may cut profit.

“Markets are progressively pricing in a deeper and more prolonged recession,” said Prasad Patkar, who helps manage about $800 million at Platypus Asset Management in Sydney. “A depression is too ugly to contemplate. It’s an ultra-low probability, but not zero probability.”

The MSCI Asia Pacific Index fell 6.8 percent to 77.42 this week. Nine of the 10 industry groups declined on the index this week. The measure rose yesterday on speculation governments will step up efforts to revive economies and after the Wall Street Journal reported Citigroup Inc. may be sold.

Nikkei, Hang Seng

Japan’s Nikkei 225 Stock Average declined 6.5 percent to 7,910.79, after the world’s second-largest economy slipped into recession for the first time since 2001. Hong Kong’s Hang Seng Index retreated 6.5 percent as the city entered its first recession since the outbreak of a deadly epidemic in 2003. Taiwan and Singapore forecast deeper contractions. All markets in the region declined this week.

MSCI’s Asian index has plunged 51 percent in 2008 as global financial companies’ losses and writedowns from the collapse of the U.S. subprime-mortgage market neared $1 trillion. Rallies have fizzled -- most recently a 25 percent gain posted in the seven trading days following Oct. 27 -- as the economies of the U.S., Japan and the euro zone entered recession.

Shares on the MSCI gauge are now valued at 9.5 times trailing earnings after falling to as low as 8.2 times last month. That compares with 19.5 times on Nov. 11, 2007, when the measure hit a peak of 172.32. Prior to the current market turmoil, the price-earnings ratio never dropped below 10, according to Bloomberg data.

Fear, Greed

“Fear has well and truly taken over from greed,” said Rob Patterson, who manages about $2 billion at Argo Investments Ltd. in Adelaide. “We’re seeing undisciplined selling. There’s definitely an element of irrationality to all this.”

Tokio Marine tumbled 36 percent to 2,015 yen, after cutting its profit forecast by 72 percent. Mitsui Sumitomo Insurance Co. and Sompo Japan Insurance Inc., two insurers that reduced their earnings projections, dropped 30 percent and 28 percent respectively.

Babcock & Brown, the worst-performing stock on MSCI’s Asian gauge this year, tumbled 48 percent to A$0.25 before trading in its shares was halted on Wednesday, as the company sought the release of a deposit held by a bank. Babcock didn’t identify the bank or provide further details.

Oil and mining companies declined as prices of their commodities retreated on concern a global recession will curb demand for energy and industrial metals.

Woodside Petroleum declined 21 percent to A$29. Cnooc Ltd., China’s largest offshore oil explorer, retreated 16 percent to HK$5.06. Oz Minerals, the world’s second-largest zinc mining company, fell 33 percent to A$0.595, after saying it may also have to write down the value of stakes in two companies following a plunge in share prices.

Bumi Tumbles

Bumi Resources tumbled 39 percent to 710 rupiah. The shares have declined 60 percent since Nov. 6, when they resumed trading after a one-month halt, as investors who had borrowed to buy the stock, known as margin trading, sold to cover losses. The price drop threatens plans by investment company PT Bakrie & Brothers to sell its 35 percent stake in Bumi to an Indonesian affiliate of U.S. buyout firm TPG for $1.3 billion.

Oil fell below $50 a barrel on the New York Mercantile Exchange on Thursday, down almost $100 a barrel below its peak of $147.27 on July 11. The Reuters/Jeffries CRB Index of 19 raw materials fell more than 50 percent from a record in July.

“There are tremendous amounts of economic distress,” said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors Inc. in Holmdel, New Jersey. “Everywhere you look, there are horrible economic numbers from now to as far as the eye can see.”

Winners

Among stocks that gained, Aozora Bank Ltd. surged 35 percent to 107 yen for the biggest percentage gain on MSCI’s Asian gauge. The Japanese bank began a plan to buy back as much as 20 billion yen ($210 million) of its own shares.

Macquarie Group Ltd., Australia’s biggest securities firm, gained 19 percent to A$27.06 after posting a smaller-than- expected drop in profit and saying earnings may withstand the credit crunch.

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