By Chua Kong Ho and Kyung Bok Cho
Nov. 13 (Bloomberg) -- Asian stocks and U.S. futures fell, extending a global rout, as the U.S. Treasury scrapped plans to buy mortgage assets, Commonwealth Bank of Australia said bad debts may double and China’s industrial output missed estimates.
Commonwealth Bank slumped 6 percent as Treasury Secretary Henry Paulson shifted the focus of the government’s $700 billion bailout plan to consumer credit. BHP Billiton Ltd., the world’s largest mining company, dropped 12 percent after oil and metals prices sank. LG Display Co. and Sharp Corp. tumbled after being fined for price fixing and as Intel Corp. lowered its sales forecast. China Construction Bank Corp. fell 6.6 percent in Hong Kong after the nation’s factory production slowed.
“Investors had expected corporate earnings and economic data to be bad, but the figures keep getting worse,” said Seo Jung Ho, who helps oversee $2.2 billion at UBS Hana Asset Management Co. in Seoul. “Paulson’s change in plans is making people wonder if our fears are coming true, that the financial crisis in the mortgage sphere is spreading to consumers.”
The MSCI Asia Pacific Index fell 4.7 percent to 82.38 at 4:22 p.m. in Tokyo. The stock index has declined 48 percent this year, valuing it at 9.8 times reported earnings. That compares to 18 times for the Standard & Poor’s 500 Index, and 8.9 times for Europe’s Dow Jones Stoxx 600 Index.
Futures on the S&P 500 lost 0.7 percent. Financial stocks led the U.S. gauge down 5.2 percent yesterday, leaving it less than 0.5 percent above its lowest close in five years. Citigroup Inc. and the S&P 500 Financials Index slid to 12-year lows. The Stoxx 600 Index sank 3.3 percent. The MSCI World Index dropped 1.1 percent today, taking a three-day slide to 8.5 percent.
Mounting Credit Losses
Most Asian markets slumped as Best Buy Co., the largest U.S. electronics retailer, warned of a slowdown in spending, fueling concern that corporate profits worldwide are declining. Dentsu Inc. and Asatsu-DK Inc., two of Japan’s biggest advertisers, lowered their profit forecasts.
Japan’s Nikkei 225 Stock Average dropped 5.3 percent to 8,238.64. The country’s economy is at risk of deteriorating further as the global financial turmoil slows growth worldwide, central bank board member Seiji Nakamura said today. Hong Kong’s Hang Seng Index lost 5.8 percent, led by HSBC Holdings Plc.
The collapse of the U.S. mortgage market sparked $950 billion in losses and writedowns at financial companies and now threatens a global economic recession. The International Monetary Fund said on Nov. 7 the U.S., Europe and Japan may experience the first simultaneous recession in the post-World War II era.
The world is in for an extended period of sluggish growth, David Bonderman, founder of private equity firm TPG Inc., said in Hong Kong today. Central banks in the U.S., U.K. and Japan are among those that have lowered benchmark interest rates to stimulate spending and growth.
‘Troubled Market’
Treasury and Federal Reserve officials are exploring a new “facility” to bolster the market for securities backed by assets, Paulson said. Officials are considering using a portion of the $700 billion financial bailout money to “encourage private investors to come back to this troubled market,” he said.
Buying “illiquid” mortgage-related assets -- the reason the Troubled Asset Relief Program was established a month ago -- is no longer being considered, he said. Citigroup, Bank of America Corp., and Goldman Sachs Group Inc. dropped more than 9 percent each in U.S. trading yesterday after Paulson’s comments.
In Sydney, Commonwealth Bank fell 6 percent to A$33, the lowest close since Jan. 25, 2005. Australia’s biggest mortgage lender said bad debts may double this year due to lending to companies including Lehman Brothers Holdings Inc. HSBC, Europe’s largest bank, slid 5.8 percent to HK$81.25 as it will cut jobs in its private-banking division. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, lost 3.7 percent to 592 yen.
Commodities Slump
Mizuho Financial Group Inc., Japan’s second-largest bank by revenue, slumped 6.6 percent to 254,500 won. The company plans to sell about 300 billion yen ($3.2 billion) of preferred securities to replenish capital depleted by rising bad loans and losses on stock investments.
“It’s hard to get away from the drumbeat of negatives,” said Liam Dalton, who oversees $1.3 billion as New York-based chief executive officer of Axiom Capital Management.
Energy companies on the MSCI Asia Pacific Index lost 5.3 percent as a group, while raw-material producers declined 6.9 percent collectively. Melbourne-based BHP tumbled 12 percent to A$25, after scrapping a possible $4.5 billion nickel project in Indonesia. PetroChina Co., China’s largest oil producer, slumped 8.9 percent to HK$5.45 in Hong Kong. Exxon Mobil Corp., the biggest oil company, fell 5.1 percent to $68.93 in New York.
Oil sank 5.3 percent to $56.16 a barrel at the close of New York trading on forecasts that tomorrow’s Energy Department report will show U.S. crude inventories grew last week amid decreased energy demand. Nickel, gasoline and crude led declines in the Reuters/Jefferies CRB Index of 19 raw materials.
Toshiba, Sony
Companies with U.S. sales fell as Best Buy yesterday slashed its earnings forecast for the year through February, citing a “seismic” slowdown in consumer spending in the largest market for Asian-made products.
The Best Buy report preceded Intel’s announcement that fourth-quarter sales will be lower than its earlier estimate by about $1 billion amid “significantly weaker” demand. Applied Materials Inc., the biggest maker of chip-production machinery, also said yesterday that orders may fall more.
Toshiba Corp., Japan’s largest chipmaker, slumped 4.8 percent to 337 yen in Tokyo. Sony Corp., the world’s second- largest consumer electronics maker, dropped 8.7 percent to 2,000 yen. Samsung Electronics Co., the world’s second-largest semiconductor maker after Intel, lost 1.4 percent to 474,000 won.
‘So Many Problems’
LG Display tumbled 11 percent to 20,100 won, Sharp fell 8.4 percent to 667 yen, while Chunghwa Picture Tubes Ltd. dropped 7 percent to NT$2.79. The three liquid-crystal-display makers agreed to plead guilty and pay $585 million in fines for conspiring to fix prices.
Chinese shares in Hong Kong sank after industrial output rose in October at the slowest pace in seven years. Growth of 8.2 percent missed the 11.1 percent median estimate in a Bloomberg News survey of economists.
China Construction Bank fell 6.6 percent to HK$3.97. Industrial & Commercial Bank of China Ltd. declined 6.3 percent to HK$3.59.
“There are just so many problems around,” said Julian Robertson, founder of hedge fund Tiger Management LLC, who is betting against some Chinese, Irish and Spanish companies. “I don’t think people have recognized the extent of this potential correction which we’re in.”
Dentsu, Japan’s largest advertiser, fell 7.5 percent to 153,300 yen, after cutting its full-year profit forecast by 27 percent. Asatsu-DK dropped 6.1 percent to 2,220 yen, after saying profit will be 46 percent lower than its previous prediction.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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