South Korea, Australia Stocks Fall as Global Recession Deepens

By Sarah Jones and Shani Raja

Dec. 23 (Bloomberg) -- South Korean, Australian and New Zealand stocks fell as a smaller-than-forecast interest rate cut in China and an economic growth report in New Zealand fanned concerns that a global recession is deepening.

Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, tumbled 8.3 percent in Seoul after the company had its debt rating cut. Bendigo & Adelaide Bank Ltd. dropped 7.3 percent after selling shares to boost capital. Air New Zealand Ltd. lost 4.5 percent as a government report showed the country’s economy contracted for the third straight quarter.

“It’s hard to keep these markets propped up when the news flow keeps being so negative,” said Philip Schwartz, who manages $750 million at International Value Equities in New York. “Economic news continues to be very, very weak.”

South Korea’s Kospi Index fell 2 percent to 1,156.07 as of 10:16 a.m. in Seoul. Australia’s S&P/ASX 200 Index declined 0.3 percent, while New Zealand’s NZX 50 Index lost 0.5 percent. The MSCI Asia Pacific Index was little changed, with Japan’s markets closed for a public holiday.

The MSCI gauge has lost 44 percent in 2008, 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 13 times estimated profit, about a quarter below the level at the start of 2008.

Raising Capital

U.S. stocks fell yesterday, dragging the Standard & Poor’s 500 Index down by 1.8 percent, amid signs of declining earnings. Goldman Sachs Group Inc. said the recession will hurt profit at Monsanto Co., the world’s largest producer of seeds. Walgreen Co., the second-biggest U.S. drugstore chain, posted the slowest sales growth in at least 18 years.

Chinese stocks trading in the U.S. slumped yesterday on speculation the 27-basis-point interest-rate cut wasn’t deep enough to prevent economic growth from slowing.

Hynix dropped 8.3 percent to 7,530 won after the company had its debt rating cut to B1 from Ba3 by Moody’s Investors Service, which cited a “challenging” operating environment. Separately, JPMorgan Chase & Co. slashed its share-price estimate by 20 percent.

Bendigo & Adelaide Bank declined 7.3 percent to A$10.88 after the Australian regional lender sold A$175 million ($120 million) of shares at A$10 apiece to boost capital. The price is a 15 percent discount to yesterday’s close of $11.74.

Flight Centre Ltd., Australia’s biggest travel agency, fell 4.7 percent to A$7.24. Bookings on international air routes have fallen as much as 20 percent because of a weaker domestic currency and a global economic slowdown, the Australian newspaper reported, citing the Tourism and Transport Forum.

China’s Rate Cut

Air New Zealand, the country’s biggest carrier, slumped 4.5 percent to 85 Australian cents. Cavalier Corp., the nation’s largest publicly traded carpet maker, declined 3.9 percent to NZ$1.73.

Gross domestic product declined 0.4 percent in the three months ended Sept. 30 from the second quarter, when it fell 0.2 percent, Statistics New Zealand said today.

The Bank of New York Mellon China ADR index, which tracks the country’s American depositary receipts, sank 4.2 percent yesterday. The People’s Bank of China lowered borrowing costs for the fifth time in three months as recessions in the U.S., Europe and Japan caused trade growth to collapse.

The one-year lending rate will drop by 0.27 percentage point and the deposit rate by the same amount. Citigroup Inc. and HSBC Holdings Plc had anticipated at least a 54-basis-point reduction yesterday.

“This rate cut is an indication that economic activity in China is slowing much faster than anticipated,” said Roberto Lampl, who manages $4 billion in emerging-market stocks, including Chinese shares, at ING Investment Management in The Hague. “Chinese authorities are using monetary policy to reignite demand because of this weaker-than-expected economic environment.”

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