By Patrick Rial and Masaki Kondo
Dec. 1 (Bloomberg) -- Asian stocks dropped as falling commodity prices dragged mining shares lower and the failure of homebuilder Morimoto Co. drove bankruptcies by listed companies to a postwar record in Japan.
BHP Billiton Ltd., the world’s largest mining company, lost 3.6 percent in Sydney, while Mitsubishi Estate Co., Japan’s second-biggest property developer, declined 5.6 percent. Sime Darby Bhd., which sells luxury cars in Hong Kong, motorcycles in China and homes across Malaysia, tumbled 12 percent in Kuala Lumpur after slashing its profit forecast. Sichuan Changhong Electric Co. rose 9.9 percent in Shanghai as government plans to boost growth overshadowed a record contraction in manufacturing.
The MSCI Asia Pacific Index declined 0.5 percent to 82.27 as of 4:02 p.m. in Tokyo, ending a four-day, 7.6 percent advance. The gauge has tumbled 48 percent this year during the worst financial crisis since the Great Depression. The index is valued at 12 times estimated profit, down from 17 at the start of 2008.
“Valuations can’t be used as a reason for investors to buy in because of the hazy outlook for second-half earnings,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages about $14 billion in Tokyo. “I recommend being in the safe havens of cash and bonds.”
Japan’s Nikkei 225 Stock Average lost 1.4 percent to 8,397.22. Bank of Japan Governor Masaaki Shirakawa said in a speech today it’s getting more difficult for companies to borrow money and that the economy is unlikely to recover until at least the middle of the financial year ending in March 2010.
Hong Kong’s Hang Seng Index climbed 2 percent, led by Sun Hung Kai Properties Ltd., which sold more than 500 apartments at two new projects over the weekend.
Simultaneous Recessions
Futures on the U.S. Standard & Poor’s 500 Index declined 0.7 percent. The gauge advanced 0.7 percent on Nov. 28 on speculation government bailouts will shore up an economy weakened by a housing slump and resulting credit crisis.
The International Monetary Fund said on Nov. 7 the U.S., Europe and Japan may experience the first simultaneous recessions in the post-World War II era. The World Bank slashed its growth outlook for China last week to 7.5 percent for 2009, which would be the slowest pace of growth since 2001.
BHP slipped 3.6 percent to A$29.90. Rio Tinto Group, the world’s third-largest mining company, fell 8.4 percent to A$42.70. Australia’s Newcastle coal, a benchmark for Asia, lost 8.7 percent last week to the lowest since October 2007, according to the globalCOAL NEWC Index, as energy demand in China fell.
BHP and Rio may be forced to cut contract prices for coal by a third next year, according to a Bloomberg survey of nine analysts. Rio may also have to lower its dividend to repay debt, according to Glyn Lawcock, a Sydney-based analyst at UBS AG.
Worsening Outlook
A measure of six metals traded on the London Metal Exchange dropped 1.4 percent on Nov. 28. Copper futures in New York lost as much as 1.3 percent in after-hours trading.
“The worsening outlook for the global economy will likely continue driving down commodity prices,” said MU’s Morikawa.
Keppel Corp., the world’s biggest builder of oil rigs, dropped 4.3 percent to S$4.02, continuing a slide from last week, after saying it is reviewing options with customers who made orders prior to the collapse of financial markets.
Mitsubishi Estate, which owns office buildings in Tokyo’s main business district, fell 5.6 percent to 1,341 yen. Mitsui Fudosan Co., Japan’s largest property developer, retreated 4.6 percent to 1,399 yen.
Bankruptcy Protection
Morimoto was untraded, with the shares offered lower by 14 percent at 370 yen. The company filed for protection from creditors on Nov. 28 with 162 billion yen ($1.7 billion) of debt, nine months after its initial public offering. The bankruptcy, Japan’s second-biggest this year, drove corporate failures of listed companies to the highest level since World War II, according to research company Teikoku Databank Ltd.
Japan General Estate Co., a condominium and home developer, plunged 14 percent to 118 yen, a record low, after canceling plans to hire 53 college graduates.
In Malaysia, Sime Darby lost 12 percent to 5.15 ringgit after cutting its full-year profit target to a level 34 percent lower than the average forecast of analysts surveyed by Bloomberg. AirAsia Bhd., Southeast Asia’s biggest discount airline, lost 9.9 percent to 1 ringgit after posting its first quarterly loss since going public in 2004.
Lower Profit Forecast
Cathay Pacific Airways Ltd. gained 4 percent to HK$7.82. Hong Kong’s biggest carrier cut back growth plans for next year and offered employees unpaid leave as travel demand declines.
Sichuan Changhong, a maker of television sets, surged 9.9 percent to 3.43 yuan in Shanghai after China’s government said it will allow farmers in 14 provinces to buy selected household appliances at a discount in a move to boost rural consumption.
Baoshan Iron & Steel Co., the country’s largest steelmaker, declined 0.4 percent to 5.02 yuan. The Purchasing Managers’ Index, a measure of manufacturing activity, fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said.
“On the one hand you have the stimulus package and measures to boost consumption, on the other hand you continue to get weak numbers,” said James Liu, deputy chief investment officer at APS Asset Management in Shanghai, which oversees about $1 billion. “The subsidies will help white-goods manufacturers, especially those on the low end, and also protect employment.”
Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, rallied 21 percent to A$2.50. A major shareholder is likely to have completed a sale of Fortescue shares, removing selling pressure the stock, said Andrew Sekely, head of Australian equities at Intersuisse Ltd. in Sydney.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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