By Patrick Rial and Masaki Kondo
Dec. 19 (Bloomberg) -- Asian commodity stocks slumped after crude fell below $36 a barrel and copper dropped to a four-year low, countering advances by technology shares as computer-memory chip prices rallied.
BHP Billiton Ltd., the world’s biggest mining company, sank 3.5 percent in Sydney, and Cnooc Ltd., China’s largest offshore oil producer, lost 3.7 percent. Samsung Electronics Co. gained 4.6 percent as a benchmark gauge of memory prices climbed for the first time since June. Japan’s Nikkei 225 Stock Average swung between gains and losses before closing lower after the central bank cut interest rates.
“The continuous decline in oil is convincing investors that the economic outlook is bleak,” said Hideo Arimura, who oversees about $1.9 billion at Mizuho Asset Management Co.
The MSCI Asia Pacific Index lost 0.3 percent to 90.08 as of 3:48 p.m. in Tokyo. Almost five stocks fell for every five that dropped. The gauge has climbed 6.6 percent this week, the most in a month, and risen 8.8 percent in December, putting it on course for its first monthly advance since April.
MSCI’s Asian index is still down 43 percent for the year, the worst annual performance in its two-decade history, as the global financial crisis dragged the world’s biggest economies into recessions. Analysts have cut their average earnings-per- share estimate for companies on the index by 26 percent since the beginning of the year, data compiled by Bloomberg show.
Lower Borrowing Costs
The Bank of Japan lowered the target for the overnight lending rate to 0.1 percent from 0.3 percent. The bank also proposed to buy commercial paper to help companies gain access to funds. The move was not as bold as the 1 percentage point cut by the Federal Reserve on Dec. 16, according to investors including Masayuki Kubota at Daiwa SB Investments Ltd.
Shortly before the decision, investors saw a 50 percent chance that the central bank would reduce the key rate, according to calculations made by JPMorgan Chase & Co. based on interest- rate swaps trading.
“It seems as if they are reluctantly lowering the rate,” said Kubota, a senior fund manager in Tokyo, who oversees $1.7 billion. “If they really supply a ton of money to the market, I will change my view on the BOJ, but today’s message is not strong enough.”
The Nikkei 225 lost 0.9 percent to 8,588.52, after rising as much as 0.9 percent immediately following the announcement.
Toyota Motor Corp., the world’s second-largest automaker, declined 2 percent after the Nikkei newspaper said the company will likely report its first-ever annual operating loss in March.
U.S. Futures
U.S. stocks slipped yesterday, with the Standard & Poor’s 500 Index declining 2.1 percent as S&P cut General Electric Co.’s debt outlook. Futures on the U.S. benchmark index retreated 0.8 percent today.
BHP declined 3.5 percent to A$29.92. Cnooc dropped 3.7 percent to HK$7.30. Inpex Corp., Japan’s largest oil explorer, lost 5.9 percent to 586,000 yen.
The global recession has hurt commodities demand, creating a glut of oil that has driven prices down 75 percent from a record $147.27 on July 11. A measure of six metals traded on the London Metal Exchange lost 2.8 percent, bringing the slide from a March peak to 63 percent. Copper prices plunged as much as 6.3 percent to the lowest since October 2004.
Crude oil futures declined 9.6 percent to $36.22 a barrel in New York yesterday, the lowest settlement since June 2004. Oil prices fell in spite of a record output cut by the Organization of Petroleum Exporting Countries this week.
Airlines Gain
The drop in oil also boosted optimism that airlines’ fuel expenses will decline. Virgin Blue Holdings Ltd., Australia’s second-biggest carrier, rallied 7.3 percent to 30 Australian cents. Cathay Pacific Airways Ltd., Hong Kong’s largest airline, added 5.4 percent to HK$8.83.
Samsung gained 4.6 percent to 489,500 won. Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, jumped 4.8 percent to 8,520 won. Elpida Memory Inc., the largest in Japan, soared 17 percent to 505 yen.
Prices of the benchmark DRAM chip rose 12 percent yesterday, the first increase since June, according to Dramexchange Technology Inc., Asia’s biggest spot market for chips.
Shipping-related companies fell as slowing demand for commodities shipments threatens to crimp earnings. Mitsui O.S.K. Lines Ltd., Japan’s largest operator of iron-ore ships, dropped 4 percent to 548 yen. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, plunged 4 percent to HK$6.20, while China Shipping Development Co., the nation’s largest oil carrier, fell 6.1 percent to HK$8.92.
Baltic Dry
The Baltic Dry Index, a measure of shipping costs for commodities, dropped for the first time in nine sessions because of weakening demand and surplus ships. Shipping rates collapsed to the lowest in more than two decades this month after steel demand from carmakers and builders slumped, cutting producers’ need for raw material.
Toyota declined 2 percent to 2,900 yen. A strong yen and plunging global sales are likely to cause the automaker to post its first operating loss since it began reporting earnings in 1940, the Nikkei said. The average estimate of 21 analysts surveyed by Bloomberg was for a 551 billion yen ($6.2 billion) profit.
HSBC Holdings Plc dropped 4.8 percent to HK$77.70, after analysts at Cazenove said yesterday Europe’s biggest bank’s position as a “safe haven” banking stock may be eroded as loan impairments increase in Europe and North America.
Daiichi Sankyo Co., Japan’s third-largest drugmaker, rose 5.9 percent to 2,025 yen and Ube Industries Ltd., a chemicals producer, soared 10 percent to 231 yen after the European Medicines Agency recommended approval of blood clot-blocker prasugrel, a drug the companies developed with Eli Lilly.
Newcrest Mining Ltd. surged 10 percent to A$33.50, after Capital Group Cos., the largest U.S. manager of stock and bond mutual funds, bought a 5 percent stake in Australia’s biggest gold mining company.
To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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