Most Asian Stock Markets Fall on Profit Concern; Rio, HSBC Drop

By Sarah Jones and Shani Raja

Dec. 22 (Bloomberg) -- Most Asian stock markets fell, led by commodity and financial companies, on signs the deepening global recession is hurting corporate profits.

Rio Tinto Group dropped 4.1 percent as UBS AG cut its earnings target and as the world’s third-largest mining company halted production at an iron plant. Hon Hai Precision Industry Co., the world’s biggest contract maker of electronics, lost 6.6 percent in Taipei after the company said it’s cutting jobs. DBS Group Holdings Ltd., Southeast Asia’s largest bank, slumped 4.6 percent as it sought about $2.8 billion in a rights offering.

“There’s still a lack of visibility regarding the timing of the economic recovery,” said Shane Oliver, head of investment strategy at AMP Capital Investors, which manages $61 billion in Sydney. “The economy’s going to go through a very rough period. You can’t rule out further declines in the share market.”

The MSCI Asia Pacific Index fell 0.2 percent to 89.32 as of 4:53 p.m. in Tokyo, with most of the region’s markets dropping except Japan, India, New Zealand, Malaysia and Vietnam. The Nikkei 225 Stock Average gained 1.6 percent, as Nomura Holdings Inc. advanced after Barron’s said profits from Lehman Brother Holdings Inc. assets may drive the stock higher.

HSBC Holdings Plc declined in Hong Kong after Standard & Poor’s gave Europe’s largest bank a “negative” outlook. China’s CSI 300 Index lost 1.7 percent amid concern investors will flood the market with previously untraded shares as lock-up periods expire.

MSCI’s Asian index has lost 43 percent this year, the worst annual performance in its two-decade history, as the credit crisis dragged the world’s biggest economies into recessions. The decline has taken the average valuation of companies on the measure to 12.8 times estimated profit, more than a quarter below the level at the start of 2008.

‘Severe Headwinds’

The MSCI gauge has rallied 8 percent this month, on track for its first monthly gain since April, as governments from the U.S. to Japan slashed interest rates and took more steps to bolster economies struggling to cope with $1 trillion of credit- related losses and writedowns.

U.S. stocks posted the first back-to-back weekly gains last week as the Federal Reserve cut interest rates to a record low and the government pledged a $13.4 billion rescue plan for the country’s biggest automakers.

“Historically, stimulus has worked with a lag, and things could get worse before they get better,” said Prasad Patkar, who helps manage $800 million at Platypus Asset Management in Sydney. “The world economy is still facing severe headwinds.”

A government report showed today that Japanese exports plunged the most on record last month as demand for cars and electronics collapsed. Falling commodities demand prompted Rio Tinto to suspend operations at its Hismelt pig iron plant in the state of Western Australia.

Lower Estimates

Rio shares declined for a third day, falling 4.1 percent to A$37.90. UBS cut its profit forecast for the mining company after analysts lowered their coking coal price estimates. Rio’s profit may be $6 billion in the year ending Dec. 31, 2009, 5.6 percent lower than previously estimated, a UBS report said.

BHP Billiton Ltd., the world’s largest mining company, fell 0.9 percent to A$29.64. UBS also lowered its profit estimate for the company by 7 percent to $13.3 billion in the year ending June 30, 2009.

Fortescue Metals Group Ltd. plunged 21 percent to A$1.72 after Australia’s third-biggest iron-ore producer sold shares to pay a bill and raise cash.

Hon Hai Precision fell 6.6 percent to NT$64, contributing the most to a 3.4 percent slide in Taiwan’s benchmark Taiex index. The company is “adjusting” its workforce, founder and Chairman Terry Gou said after close of trade on Dec. 19, without giving details. The severity of the recession is three times worse than the company expected, the United Evening News cited Gou as saying the same day.

Financial Shares Decline

Singapore’s DBS slid 4.5 percent to S$9.41 as it sought to raise cash to help it weather the credit crisis. DBS will issue one new share for every two held by investors at S$5.42 apiece, a 45 percent discount to Dec. 19’s closing price of S$9.85.

United Overseas Bank Ltd., Singapore’s second-largest bank, dropped 3.1 percent to S$12.60. Oversea-Chinese Banking Corp., the city’s No. 3 bank, lost 1.8 percent to S$4.98.

A gauge of financial shares on MSCI’s benchmark Asian index dropped 0.7 percent. HSBC lost 2.2 percent to HK$74.85 after S&P said on Dec. 19 that impairments for the bank will probably stay “elevated” in the U.S. and increase in the U.K.

Nomura, Japan’s biggest brokerage, jumped 7.6 percent to 752 yen. The stock may rise as much as 30 percent if the purchase of Lehman assets in Asia and Europe helps boost its profit, Barron’s reported, without citing anyone.

To contact the reporters for this story: Sarah Jones in Sydney at sjones35@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.