Asian Stocks Drop, Led by Commodity Producers; Rio Tinto Falls

By Shani Raja

Jan. 12 (Bloomberg) -- Asian stocks fell, led by commodity producers and industrial companies, as the worsening global recession drives down demand for raw materials.

Rio Tinto Group slumped 6 percent after shelving a $2.15 billion expansion of an iron ore mine in Brazil. Keppel Corp., the world’s biggest oil rig builder, tumbled 7.3 percent following the cancellation of a $405 million rig order. PetroChina Co. declined 3.9 percent as crude oil fell for a fifth day and U.S. unemployment jumped.

“The global economy is continuing to deteriorate,” said Rob Patterson, who manages about $2 billion at Argo Investments Ltd. in Adelaide. “If the U.S. economy is slowing, it means they’re importing less from countries like China, and that China is buying fewer commodities. It’s not helpful to anyone.”

The MSCI AC Asia Pacific excluding Japan Index fell 2.8 percent to 240.56 at 3:19 p.m. in Hong Kong, extending a three- day, 4.9 percent drop. All 10 industry groups retreated. The index has lost 2.9 percent this year, building on a 53 percent drop in 2008.

Japan’s markets are closed for a holiday. Australia’s S&P/ASX 200 Index slipped 1.4 percent. The Kospi Index dropped 2.1 percent in South Korea, where Hyundai Motor Co. slid 3.3 percent after planning to cut production. Wipro Ltd. plunged 8.6 percent, leading declines in India, after the World Bank said the software exporter is barred from working for the institution.

The Standard & Poor’s 500 Index sank 2.1 percent on Jan. 9, capping the worst week since November, after a government report showed the jobless rate climbed to 7.2 percent in December, more than economist estimates. Futures on the S&P 500 fell 0.4 percent today after President-elect Barack Obama said in an ABC interview that reviving the economy will require scaling back on campaign promises and personal sacrifice from all Americans.

Steel Demand

Rio Tinto lost 6 percent to A$41.30. The world’s third- largest mining company postponed an expansion of the Corumba iron ore mine in Brazil because of a decline in demand for the ingredient used to make steel.

Steel mills in Asia, Europe and North America are cutting purchases of raw materials as car manufacturers reduce output and companies cancel orders to build ships and offshore platforms.

Hyundai Motor said late on Jan. 9 it plans to cut first- quarter vehicle production in South Korea by as much as 30 percent amid plunging auto demand locally and overseas. The stock lost 3.3 percent to 45,150 won.

Ssangyong Motor Co., South Korea’s smallest carmaker, filed for court receivership at the end of last week to avoid bankruptcy after its vehicle sales fell 30 percent in 2008. Trading in its shares are suspended.

Orders Cancelled

Keppel dropped 7.3 percent to S$4.56 after Scorpion Offshore Ltd. terminated a $405 million oil rig order. The company is also discussing a settlement with Lewek Shipping Pte. for cancellation of a separate order.

Cosco Corp. Singapore Ltd. slipped 6.3 percent to 82 Singapore cents after India’s Great Eastern Shipping Co. scrapped orders for two bulk carriers due to “the current uncertain business environment.” It is the second order cancellation for Cosco in a month.

BlueScope Steel Ltd., Australia’s largest steelmaker, fell 2.1 percent to A$3.76. Dongkuk Steel Mill Co., South Korea’s third biggest, plunged 8.8 percent to 26,450 won.

Growth in the global economy will slow to 2.2 percent this year from 2008’s 3.7 percent, the International Monetary Fund said in November. A rate of 3 percent or less is “equivalent to a global recession,” according to the group.

PetroChina, Bumi

Oil producers slumped as crude oil fell for a fifth day in New York, extending last week’s 12 percent drop, on concern demand will decline more rapidly than the Organization of Petroleum Exporting Countries cuts output. Crude for February delivery lost as much as 1.7 percent to $40.15 a barrel in after- hours trading in New York.

PetroChina, China’s largest oil company, lost 3.9 percent to HK$6.75. China Oilfield Services Ltd., a unit of the nation’s largest offshore oil producer, slumped 6.2 percent to HK$5.87.

PT Bumi Resources, Asia’s largest power-station coal exporter, fell 9.5 percent to 570 rupiah, extending a four-day, 33 percent plunge. Indonesia regulators said they will review Bumi’s takeover of three companies last week. The acquisitions sparked analyst downgrades on concern the company is overpaying.

China Eastern Airlines Corp., the nation’s third-largest carrier by fleet size, slumped 7.1 percent to HK$1.04 in Hong Kong, after the carrier said it lost about 6.2 billion yuan ($906 million) on fuel hedging contracts last year.

Property developers dropped in Hong Kong after China’s house prices fell 0.4 percent in December from a year earlier, the first decline since the government started releasing the data in August 2005.

Builders Slide

Sun Hung Kai Properties, the city’s biggest developer by market value, dropped 2.4 percent to HK$68.35. Sino Land Co., the fifth largest, slumped 6.8 percent to HK$7.83.

Wipro, India’s third-largest software exporter, plunged 8.6 percent to 229.35 rupees. The company is barred from World Bank contracts for four years from June 2007 for providing “improper benefits” to the bank’s staff, according to a statement on its Web site. The purchase didn’t violate any ethics or conflict of interest policies, Wipro said in an e-mailed statement.

The World Bank’s statement came less than three weeks after it disclosed Satyam Computer Services Ltd. was banned. Satyam surged 55 percent to 36.75 rupees today on speculation a new government-appointed board will draw up a rescue plan for the company at the center of India’s biggest corporate fraud.

The stock lost 87 percent in the last two trading sessions after Chairman Ramalinga Raju said he falsified the accounts and quit.

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