Asia Stocks Slump on Concern Bank Losses Will Prolong Recession

By Shani Raja

Jan. 21 (Bloomberg) -- Asian stocks fell for a second day, led by financial companies and metals producers, on concern mounting bank losses worldwide will deepen the global recession and squeeze demand for the region’s commodities.

Mitsubishi UFJ Financial Group Inc. slumped 4 percent in Tokyo as speculation global banks need to bolster capital sent U.S. financial shares to an almost 14-year low. BHP Billiton Ltd., the world’s biggest mining company, retreated 3 percent after saying it will take a charge after closing a nickel mine as the metal’s price slumps. Sony Corp., which gets a quarter of its sales from the U.S., lost 3.1 percent after the yen rose.

“The concern is that banks around the world are short of capital. As we increasingly come to that realization, stocks are just getting hammered,” said Philip Schwartz, who directly manages $800 million of international equities at ING Investment Management in New York. “We’re very concerned about metals and overall industrial demand.”

The MSCI Asia Pacific Index dropped 1.7 percent to 81.80 as of 10:40 p.m. in Tokyo, with four of its members falling for each that advanced. Japan’s Nikkei 225 Stock Average lost 2.1 percent, while South Korea’s Kospi Index dropped 2.1 percent. All markets open for trading declined.

MSCI’s Asian gauge lost a record 43 percent last year as global financial companies posted more than $1 trillion in writedowns and credit losses and the world’s biggest economies slipped into recession. Singapore’s economy may shrink as much as 5 percent this year, the trade ministry said today.

Lower Profit Forecast

Harvey Norman Holdings Ltd. led Australian retailers lower after David Jones Ltd., the country’s second-biggest department store chain, cut its profit forecast on concern the nation’s economy is slowing. KT Corp. rallied 7.4 percent in Seoul on plans to take over its mobile-phone unit.

Futures on the Standard & Poor’s 500 Index added 0.3 percent. Financial stocks led U.S. equities lower yesterday, dragging the S&P 500 down by 5.3 percent.

State Street Corp., the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co. and Bank of America Corp. slumped more than 23 percent on an analyst’s prediction that they’ll need to take steps to shore up their balance sheets.

Mitsubishi UFJ, Japan’s largest listed bank, lost 4 percent to 482 yen. National Australia Bank Ltd., the nation’s biggest by assets, declined 3.4 percent to A$17.76.

BHP dropped 3 percent to A$28.07. The company said it will book a $1.2 billion pretax charge for the six months ended Dec. 31 after shutting the Ravensthorpe mine and closing part of a refinery. It’s also cutting coking coal output as much as 15 percent, Chief Financial Officer Alex Vanselow said.

Safe Haven

Rio Tinto Group, the third-biggest mining company in the world, slipped 3 percent to A$36.87. The company announced plans to cut aluminum production and eliminate about 1,100 jobs.

Newcrest Mining Ltd., Australia’s largest gold producer, jumped 7.6 percent to A$32.85 after gold rose to the highest in more than a week in New York as investors sought a haven.

Sony lost 3.1 percent to 1,962 yen as a stronger currency cuts the value of overseas sales. Canon Inc., which gets a third of its sales from the Americas, fell 1.6 percent to 2,740 yen. The currency rose to as much as 89.69 from 90.28 at the close of stock trading in Tokyo yesterday.

Harvey Norman, Australia’s biggest furniture and electronics retailer, tumbled 7 percent to A$2.14. David Jones slumped 6.1 percent to A$2.48 after saying earnings may be flat this year and fiscal 2010, compared with an earlier forecast of 5 percent to 10 percent profit growth annually.

KT Corp., South Korea’s largest phone and Internet company, climbed 7.4 percent to 42,650 won after saying it plans to buy the shares of KT Freetel Co. it doesn’t already own. KT Freetel, KT Corp.’s wireless unit, gained 6.2 percent to 30,850 won.

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