Australian, South Korean Financial Shares Drop; BHP Advances

By Malcolm Scott

Nov. 24 (Bloomberg) -- Australian and South Korean financial stocks fell as last week’s plunge in Citigroup Inc. shares sparked concerns about the fate of the U.S. bank and its $2 trillion of assets.

Commonwealth Bank of Australia Ltd. and Shinhan Financial Group Co. lost more than 3 percent. BHP Billiton Ltd., the world’s largest mining company, rose 1.3 percent as copper and aluminum rebounded from three-year lows. Woodside Petroleum Ltd. surged 1.8 percent after oil climbed 2.2 percent in Asian trading.

“The Citigroup plight is seen as an example of the fact that the situation for the financial sector globally isn’t getting better,” said Angus Gluskie, who manages the equivalent of $226 million at White Funds Management in Sydney.

Australia’s S&P/ASX 200 Index fell 0.7 percent to 3,390.30 at 11:45 a.m. in Sydney. The benchmark index is trading at about 9.2 times reported earnings, compared with an average 16 in the past five years. South Korea’s Kospi Index gained 0.6 percent.

Japanese markets are closed for a holiday. The MSCI Asia Pacific excluding Japan Index added 0.4 percent to 207.34, with seven of its 10 industry groups advancing. The gauge is down 61 percent this year.

The rate Australian banks charge each other for three-month loans rose 3.8 basis points to 4.47 percent in Sydney. The cost of borrowing in dollars for three months in London rose for the first time in four days on Nov. 21 as concern about credit losses and writedowns overshadowed interest-rate reductions and cash funding by central banks.

Government Takeover?

Citigroup, whose shares lost 60 percent last week, and U.S. regulators are in talks about a plan to limit the bank’s potential losses from toxic assets, people familiar with the matter said. December futures on the Standard & Poor’s 500 Index gained 1.2 percent as Democratic lawmakers pledged to agree on an economic stimulus package by January.

U.S. stocks rallied Nov. 21, pushing the S&P 500 up 6.3 percent, after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner to head the Treasury. Concern Citigroup may need a government takeover sent bank stocks in the S&P 500 down 24 percent last week, the steepest slide in at least 19 years.

“The market was calling for either a breakup or some kind of resolution” for Citigroup, said Jack Ablin, who helps manage about $60 billion as chief investment officer of Harris Private Bank in Chicago. “This is going to be the main focus of market activity.”

To contact the writer on the story: Malcolm Scott in Sydney at Mscott23@bloomberg.net.