By Shani Raja
Jan. 21 (Bloomberg) -- Asian stocks declined for a second day, led by financial companies and metals producers, on concern mounting bank losses will deepen the global recession.
HSBC Holdings Plc, which owns two banks in Hong Kong, lost 3.5 percent amid speculation lenders globally need to bolster capital. China Life Insurance Co., the nation’s largest insurer, lost 5.9 percent in Hong Kong after saying profit last year may fall by 50 percent. DBS Group Holdings Ltd., Singapore’s No. 1 lender, led the city’s equities lower after the government cut its economic forecast for the second time in three weeks.
“We don’t know how big loan losses at the banks will be as the economy continues to deteriorate,” said Hugh Dive, who helps manage about $3 billion at Sydney-based Investors Mutual Ltd. “When their capital base is reduced, it mitigates their ability to lend, and that slows the broader economy.”
The MSCI Asia Pacific Index lost 1.6 percent to 81.87 as of 2:43 p.m. in Tokyo, with three stocks falling for each that rose. Japan’s Nikkei 225 Stock Average dropped 1.5 percent and South Korea’s Kospi Index slipped 1.8 percent. Most markets declined, led by the Philippine Stock Exchange Index’s 3.1 percent slump.
MSCI’s Asian gauge tumbled by a record 43 percent last year and has slipped 8.7 percent in 2009 as the worst financial crisis since the Great Depression dragged the world’s biggest economies into recession. The average valuation of companies on the benchmark measure has fallen about two-fifths in the past year to 10 times reported profit.
BHP Billiton Ltd., the world’s biggest mining company, fell 1 percent after saying it will take a charge as it closes a nickel mine. Hanjin Heavy Industries & Construction Co. slid 15 percent in Seoul on concern it will miss profit targets. KT Corp. rallied 6.4 percent on plans to take over its mobile-phone unit.
Short Of Capital
Futures on the Standard & Poor’s 500 Index added 1 percent. Financial stocks led U.S. equities lower yesterday as Barack Obama was sworn in as president. The Dow Jones Industrial Average declined 4 percent, its biggest Inauguration Day decline.
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.
“The concern is that banks around the world are short of capital,” said Philip Schwartz, who directly manages $800 million of international equities at ING Investment Management in New York. “As we increasingly come to that realization, stocks are just getting hammered.”
Mounting Credit Losses
HSBC fell 3.5 percent to HK$55.50. Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, lost 3.2 percent to 486 yen. National Australia Bank Ltd., the nation’s biggest by assets, declined 4.2 percent to A$17.61.
A measure of financial stocks on the MSCI Asia Pacific Index has lost 13 percent this year, the worst performer among the broader gauge’s 10 industry groups, as global credit-related losses swelled to more than $1 trillion.
Australian Prime Minister Kevin Rudd said yesterday his government will take “whatever action is necessary” to stabilize financial markets. French President Nicolas Sarkozy also agreed to provide more funds to the country’s biggest lenders, a day after the U.K announced its second financial rescue plan in three months.
BHP dropped 1 percent to A$28.66. 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.
‘A Sober Reminder’
Rio Tinto Group, the third-biggest mining company in the world, slipped 2 percent to A$37.25, after announcing plans to cut aluminum production and eliminate about 1,100 jobs.
“What we’re seeing today is a sober reminder of the unwinding of the mining boom caused by the global financial crisis,” Australian Treasurer Wayne Swan said today.
Newcrest Mining Ltd., Australia’s largest gold producer, jumped 8.2 percent to A$33.04 after gold rose to the highest in more than a week in New York as investors sought a haven.
DBS declined 2.2 percent to S$8.47, while Singapore Telecommunications Ltd., Southeast Asia’s biggest telephone company, fell 1.6 percent to S$2.53. Gross domestic product may shrink 2 percent to 5 percent this year, the trade ministry said.
China Life dropped 5.9 percent to HK$20.65 in Hong Kong after its profit warning. Angang Steel Co., China’s second- largest steelmaker, fell 8.6 percent to HK$7.24 after saying earnings last year more than halved.
Deepening Slump
Hanjin Heavy, the first South Korean shipyard to export vessels, plunged 15 percent to 30,600 won, the MSCI Asia Pacific Index’s biggest loser. Lower earnings from shipbuilding may cause the company to miss profit targets, said Lee Jae Won, an analyst at Tong Yang Securities Inc.
David Jones Ltd., Australia’s second-biggest department store chain, slumped 5.3 percent to A$2.50 after cutting its profit forecast as the nation’s economy slows. Harvey Norman Holdings Ltd., Australia’s biggest furniture and electronics retailer, sank 4.4 percent to A$2.20.
Stocks in the Philippines fell for a seventh day on concern the deepening economic slump will curb demand for the country’s exports and labor. SM Prime Holdings Inc., the nation’s largest shopping mall operator, fell 5.2 percent to 7.30 pesos.
KT Corp., South Korea’s largest phone and Internet company, climbed 6.4 percent to 42,250 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 5.7 percent to 30,700 won.
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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