Asian Stocks Slump to Five-Year Low, Extending Global Rout

By Kyung Bok Cho and Chan Tien Hin

Nov. 20 (Bloomberg) -- Asian stocks fell, driving the region's benchmark index to its lowest level since August 2003, as Japan's exports declined the most in almost seven years and U.S. consumer prices sank by a record.

Nintendo Co. and Sony Corp. lost more than 6 percent on concern demand is slumping in North America, where the companies get at least a quarter of their sales. Japanese insurers tumbled the most since 1987, led by T&D Holdings Inc., after they slashed profit forecasts as the value of securities investments dropped. Rio Tinto Group plunged 13 percent as a bleaker global economic outlook triggered a decline in commodities prices.

``It's the end of the world as we know it,'' said Raymond Tang, who oversees $5.8 billion as chief investment officer at CIMB-Principal Asset Management Bhd., a unit of Malaysia's second-biggest bank. The economic slump is ``the worst I've seen on a global scale, with no region to help each other,'' he said.

The MSCI Asia Pacific Index slumped 5.2 percent to 75.09 at 3:51 p.m. in Tokyo, extending this week's decline to 9.6 percent. Sixteen stocks fell for each that rose on the measure.

Futures on the U.S. Standard & Poor's 500 Index retreated 1.5 percent. The S&P 500 tumbled 6.1 percent yesterday, as Citigroup Inc. announced a plan to buy troubled investment-fund assets and concern grew over the survival of the nation's car industry. Europe's Dow Jones Stoxx 600 Index slipped 4 percent. Both benchmark gauges closed at the lowest levels since 2003.

MSCI's Asian index has erased a 25 percent rally it posted since Oct. 27, when it last closed at a five-year low, as recessions in Japan and Hong Kong and lower profit forecasts wiped out optimism sparked by global interest rate cuts and Barack Obama's presidential victory in the U.S.

Deflation Concern

U.S. consumer prices plunged 1 percent last month, the most since records began in 1947, raising the risk of deflation, while housing starts tumbled to a record low. Federal Reserve policy makers last month predicted the U.S. economy will contract through the middle of 2009, with some prepared to cut interest rates further in response, records released yesterday show.

``U.S. consumers have overextended themselves and the consequence of their retrenching is that there's not going to be any growth for the next five years,'' said Takashi Kamiya, who helps oversee some $16 billion as chief economist at T&D Asset Management Co. in Tokyo. ``There's nothing to be positive about.''

Japan's Nikkei 225 Stock Average lost 6.9 percent to 7,703.04. Isuzu Motors Ltd. and Mazda Motor Corp. dropped after saying they will slash at least 2,700 temporary jobs in Japan as the companies reduce output on falling demand.

South Korea's Kospi index slid 6.7 percent, completing its first eight-day losing streak since March 2003, as investors drained funds from emerging markets. KB Financial Group Inc. led declines, while the won slumped to a decade-low.

Exports Slump

Hong Kong's Hang Seng Index retreated 5.5 percent, led by developers including Hang Lung Properties Ltd., on concern the city's recession will cut demand for housing.

Nintendo, the world's biggest maker of handheld video-game consoles, declined 7.9 percent to 27,010 yen in Osaka. Sony slumped 6.4 percent to 1,826 yen.

Exports, the main engine of Japan's economic growth in the past six years, fell 7.7 percent from a year earlier, the Finance Ministry said. The nation's corporate-bond risk rose to a record after the report, according to the Markit iTraxx Japan index.

MSCI's Asian index has plunged 52 percent in 2008 as global financial companies' losses and writedowns from the collapse of the U.S. subprime-mortgage market mounted, eventually toppling Lehman Brothers Holdings Inc. and arresting global expansion. The Asia-Pacific region may grow in 2009 at less than half the pace of the previous two years, the Pacific Economic Cooperation Council said today.

`Element of Irrationality'

Shares on the index trade at 9.4 times trailing earnings, compared with 19.5 times in November last year, when the measure hit a peak of 172.32, Bloomberg data shows.

``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.''

The decline in stocks forced Japanese insurers to reduce their full-year earnings forecasts, sending the nine-member Topix Insurance Index down 15 percent, the worst performance among 33 industry groups.

T&D Holdings Inc., Japan's biggest publicly traded life insurer, tumbled 14 percent to 2,970 yen. T&D lowered its target by 95 percent. Tokio Marine Holdings Inc., the largest casualty insurer, plunged 15 percent to 2,220 yen after cutting its forecast 72 percent. Both stocks fell by the most on record.

Analysts have cut profit estimates for 48 percent of stocks they cover worldwide, the most in at least 15 years, and more downgrades are likely as the economy slows, JPMorgan Chase & Co. said yesterday.

Commodities Drop

Rio Tinto, the world's third-largest mining company, dropped 13 percent to A$57.25 in Sydney. BHP Billiton Ltd., the biggest, slid 9.1 percent to A$21.10.

The Reuters/Jefferies CRB Index of 19 commodities slid 0.7 percent yesterday to its lowest close since September 2003. A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell 3.9 percent. Crude oil slumped to as low as $52.96, a level not seen since January 2007.

Isuzu, Japan's largest maker of light-duty trucks, plunged 17 percent to 123 yen. The company said it will cut domestic production and terminate 1,400 jobs as demand falls. Mazda plunged 10 percent after saying it will shed 1,300 workers.

KB, owner of South Korea's biggest bank, dropped the daily limit of 15 percent to 24,550 won. The won fell as low as 1,515.05 per dollar, the weakest since March 1998, according to Seoul Money Brokerage Services Ltd. The Korean currency is Asia's worst performer this year.

Sell Rating

Hynix Semiconductor Inc., the world's No. 2 computer-memory maker, dropped 15 percent to 6,390 won after UBS AG started coverage of the stock with a ``sell'' rating, citing a prolonged decline in industry demand.

Nomura Holdings Inc., the Japanese brokerage that took over Lehman's businesses outside the Americas, fell to the lowest since August 1984 on concern its global expansion plans may widen losses. The shares lost 11 percent to 666 yen after Chief Executive Officer Kenichi Watanabe said yesterday Nomura doesn't plan to cut jobs to return to profit.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net.