By Kyung Bok Cho and Ian C. Sayson
Nov. 6 (Bloomberg) -- Asian stocks declined, snapping a three-day gain, after profit forecasts by News Corp., Cathay Pacific Airways Ltd. and Isuzu Motors Ltd. added to evidence the global economy is headed toward a recession.
News Corp. slumped 21 percent, the most since 1987, after saying net income will fall and Cathay Pacific Airways Ltd. sank 13 percent after predicting ``disappointing'' results. Isuzu dropped 21 percent after Japan's largest maker of light-duty trucks said a stronger yen will hurt earnings. Panasonic Corp. and Hyundai Motor Co. lost more than 8 percent following a report that showed U.S. employers cut the most workers in six years, raising concern demand will slow for televisions and cars.
``Weak earnings strengthen the consensus that the world is going into a recession,'' said Seiichiro Iwamoto, who oversees about $10 billion at Mizuho Asset Management Co. in Tokyo, and is buying shares of companies that don't rely on overseas sales. ``Electronics components and automobiles are among the industries investors should be worried about.''
The MSCI Asia Pacific Index slid 6 percent to 88.74 as of 3:52 p.m. in Tokyo, surrendering more than half the ground gained in the previous three days.
Japan's Nikkei 225 Stock Average dropped 6.5 percent to 8,899.14, snapping its best six-day winning streak on record.
Shares fell in all markets open for trading apart from Vietnam. Posco dragged South Korea's Kospi index 7.6 percent lower after ArcelorMittal, the world's biggest steelmaker, said quarterly earnings will drop. Hong Kong's Hang Seng Index declined 6.4 percent after Dah Sing Banking Group Ltd. said profit will fall.
News Corp. Plunges
A worsening credit crisis that toppled Lehman Brothers Holdings Inc. and arrested growth in economies around the world has driven MSCI's Asian index down 43 percent this year. The International Monetary Fund projects the economies of the U.S., Japan and euro zone will shrink next year, said a fund staffer who cited revised forecasts.
The U.S. economy contracted in the third quarter at the fastest pace since 2001, while analysts expect Asian companies' earnings growth to decline more than previously forecast, according to Morgan Stanley.
Today's drop in the MSCI index wiped out yesterday's rally that followed Barack Obama's election to the U.S. presidency. The gauge rose 4.6 percent yesterday on speculation Obama's victory will lead to a stronger government response to the recession.
The Asian index is now valued at 1.2 times the value of net assets. It fell below book value on Oct. 27, when the gauge dropped to the lowest since 2003. The average for the past year was 1.7 times, according to data compiled by Bloomberg.
`Downward Revisions'
Futures for the Standard & Poor's 500 Index lost 1 percent. The S&P 500 fell 5.3 percent yesterday, the most in two weeks.
Australian shares in News Corp., the media company controlled by Rupert Murdoch, plunged 21 percent to A$12.50, the most since October 1987. The company said fiscal 2009 profit will drop by the ``low to mid teens'' in percentage terms, compared with a previous forecast for a gain.
Cathay, Hong Kong's biggest carrier, dropped 13 percent to HK$8.18. This year's earnings will be hurt by weakening revenue and losses on fuel-hedging contracts, which more than quadrupled from the end of September after jet-fuel prices slumped, the company said.
``The economic downturn is affecting companies across the board,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. ``We're likely to see more downward revisions for earnings forecasts.''
Isuzu tumbled 21 percent to 161 yen. The company said yesterday that annual profit will decline, compared with its previous guidance for an increase. Sales are slowing in Thailand, its biggest overseas market, and a stronger yen is reducing the value of overseas earnings, Isuzu said.
Earnings Estimates Fall
Toyota Motor Corp., Japan's largest automaker, cut its profit forecast 56 percent after trading closed today, citing lower demand and a stronger currency. The shares dropped 10 percent to 3,810 yen before the announcement.
Dah Sing Banking, the Hong Kong-based bank with potential losses tied to the collapse of Washington Mutual Inc., dropped 9.4 percent to HK$4.53, while its parent Dah Sing Financial Holdings Ltd. slipped a record 18 percent to HK$18. Dah Sing Banking said it expects second-year profit to fall ``substantially.''
Steelmakers fell after ArcelorMittal said yesterday that earnings may decline as much as 48 percent in the fourth quarter. Nippon Steel Corp., the second largest, lost 6.8 percent to 331 yen in Tokyo. Posco, Asia's third-biggest, slid 11 percent to 322,000 won in Seoul. BlueScope Steel Ltd., Australia's biggest steelmaker, slumped 12 percent to A$4.55.
Panasonic, Hyundai
Analysts now expect earnings growth in Asian markets excluding Japan to decline 7 percent this year, compared with consensus estimates for a 4.9 percent drop 18 weeks earlier, according to a Nov. 3 report by Morgan Stanley. Earnings downgrades for the region accelerated for the fourth month in October, BNP Paribas SA said in a Nov. 4 report.
Korea Exchange Bank, owned by U.S. buyout fund Lone Star Funds, sank by the daily limit of 15 percent to 7,090 won. The company said yesterday that third-quarter profit dropped 22 percent as it set aside more funds for bad loans.
Panasonic, the world's largest consumer-electronics maker, dropped 8.5 percent to 1,589 yen in Tokyo. Hyundai Motor Co., which ships three out of five of its cars overseas, declined for the fifth day in Seoul, losing 11 percent to 49,000 won.
BHP, Bumi
Service industries in the U.S. contracted the most on record to 44.4 last month, below the 47 estimated by economists, according to a report from the Institute for Supply Management. Meanwhile, U.S. companies cut 157,000 jobs in October, the most since November 2002 and bigger than an estimated drop of 102,000, according to ADP Employer Services.
Commodities producers fell after prices for oil and metals declined. BHP Billiton Ltd., the world's biggest mining company and Australia's largest oil producer, slid 7.6 percent to A$29.20. Inpex Corp., Japan's biggest oil explorer, retreated 11 percent to 599,000 yen. Korea Zinc Co., the world's second-best zinc refiner, dropped 11 percent to 66,000 won.
Oil for December delivery fell 7.4 percent to $65.30 a barrel in New York yesterday, the biggest drop since Oct. 10, as gasoline inventories rose in the U.S. An index of six metals traded on the London Metal Exchange retreated 3.5 percent.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.
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