Asian Stocks Fall as Commodity Producers, Automakers Decline

By Patrick Rial and Shani Raja

Jan. 13 (Bloomberg) -- Asian stocks dropped, sending the region’s benchmark index down the most in a month, as falling metal and oil prices dragged on commodity producers and a stronger yen dimmed the profit outlook for Japanese exporters.

Jiangxi Copper Co., China’s second-biggest producer of the metal, lost 7.1 percent in Hong Kong, while Inpex Corp. Japan’s largest energy explorer, slid 7.9 percent. Honda Motor Co., which generated more than half its profit from North America last year, sank 6.8 percent. Sony Corp. slumped 8.9 percent after the Nikkei newspaper said the company will record an annual operating loss.

“We’re bracing for some very choppy markets,” said Karma Wilson, Sydney-based head of Asian equities at AMP Capital Investors, which manages about $61 billion. “It’s going to be an extremely difficult earnings period. People are expecting it to be bad, but there will always be surprises.”

The MSCI Asia Pacific Index fell the most since Dec. 12, losing 3.1 percent to 86.34 as of 5:22 p.m. in Tokyo. The measure has dropped 3.7 percent in 2009, extending last year’s 43 percent slump triggered by a global recession that curbed demand for the region’s raw materials, automobiles and computers.

Honda led declines in Japan, where the Nikkei 225 Stock Average sank 4.8 percent to 8,413.91, the lowest close since Nov. 27, and the biggest decline in the region. The nation’s markets were shut yesterday for a holiday, when the MSCI AC Asia Pacific excluding Japan Index lost 3.2 percent.

The yen strengthened to the highest since Dec. 19 against the dollar, reducing the value of repatriated funds companies such as Honda that depend on overseas sales. Corporate bankruptcies rose for a seventh month in December in Japan, Tokyo Shoko Research Ltd. said today.

Estimates Cut

Analysts have slashed their profit estimates for companies included in MSCI’s Asian index by 39 percent since a peak in April, according to data compiled by Bloomberg.

Standard & Poor’s 500 Index futures lost 0.2 percent recently. The gauge dropped 2.3 percent in New York yesterday on speculation earnings will trail estimates.

China’s CSI 300 Index retreated 2.3 percent after a government report showed exports fell 2.8 percent in December, the biggest drop in almost a decade. Hong Kong’s Hang Seng Index slid 2.2 percent, its sixth day of declines. That’s the longest losing streak since September. Jiangxi Copper led declines.

“It’s not very wise to increase the equity portion of portfolios because we aren’t sure if the worst is over or not,” said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which oversees the equivalent of $54 billion in assets. “This year could be the worst of the current downturn in terms of the economy and profits.”

Commodity Producers

Jiangxi Copper lost 7.1 percent to HK$5.64. Mitsui & Co., Japan’s second-largest trading company and which generates more than half its profits from commodities dealing, plunged 8.8 percent to 902 yen. Rio Tinto Group, the world’s third-largest mining company, fell 2.3 to A$40.35. The miner suspended the expansion of a copper mine because of declining prices.

A measure of six metals traded in London dived 4.9 percent, the most in more than a month.

Inpex lost 7.9 percent to 644,000 yen. PTT Pcl, Thailand’s biggest oil company, slumped 5.4 percent to 159 baht.

Oil for February delivery fell 7.9 percent to $37.59 a barrel in New York yesterday, capping a five-day, 23 percent slump. Crude dropped on concern production cuts by the Organization of Petroleum Exporting Countries will fail to offset a slump in demand. The contract dropped as much as 4 percent today.

Alumina Ltd. tumbled 5.9 percent to A$1.43 after partner Alcoa Inc., the largest U.S. aluminum producer, exceeded analyst estimates with its first quarterly net loss in six years.

Honda, Toyota

Honda lost 6.8 percent to 1,938 yen. Isuzu Motors Ltd., Japan’s third-biggest maker of commercial vehicles, tumbled 9.9 percent to 128 yen. Toyota Motor Corp., which is forecasting its first operating loss in history, fell 6.4 percent to 2,875 yen.

The yen traded at 89.11 against the dollar after touching 88.88 yesterday, the strongest since Dec. 19. Carmakers have slashed profit forecasts on plunging global demand and the surging yen.

Sony slumped 8.9 percent to 2,000 yen, the steepest plunge since November. The world’s second-biggest maker of consumer electronics will likely post an operating loss of about 100 billion yen ($1.12 billion) this year, its first in 14 years, due to the stronger yen and slumping demand for electronics such as televisions, the Nikkei newspaper reported. Analysts surveyed by Bloomberg forecast a 35 billion yen operating profit.

Toshiba Corp. declined 8.6 percent to 385 yen. The world’s second-biggest maker of flash memory chips will swing to an operating loss of 200 billion yen for the year ending in March because of its memory business, the Nikkei said.

‘Gloomy Outlooks’

“Given that Sony and Toyota are coming out with gloomy outlooks, we expect more major companies to do the same,” said Mitsushige Akino, chief investment officer who oversees about $430 million at Tokyo-based Ichiyoshi Investment Management Co. “We have yet to see significant dividend cuts, but once companies do that, it will weigh heavily on markets.”

Shenzhen Development Bank Co., controlled by U.S. buyout firm TPG Inc., slumped 4 percent to 9.47 yuan after saying 2008 profit may have dropped 77 percent as it set aside more provisions against bad loans.

Japan’s real estate developers slumped after Creed Corp., a property manager, filed for bankruptcy on Jan. 9 with 65.1 billion yen in debt. Creed, which had tried to rehabilitate itself through asset sales and job cuts, dropped by its 2,000 yen daily limit to 11,790 yen without any trades occurring.

‘Flight to Quality’

Mitsubishi Estate Co., Japan’s biggest property developer by market value, retreated 9.2 percent to 1,291 yen. Mitsui Fudosan Co., Japan’s second largest by value, lost 7.6 percent to 1,295 yen.

“This bankruptcy will push the market back into ‘flight to quality’ mode as its best means of risk avoidance,” Yoshihiro Hashimoto, an analyst at Merrill Lynch & Co., wrote in a report titled “Creed shock.”

Infosys Technologies Ltd., India’s second-largest computer- services provider, jumped 4.9 percent to 1,216 rupees after third-quarter profit climbed 33 percent as the company won orders from clients seeking to cut costs.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.