Asian Stocks Fall as Recession Erodes Profits; Satyam Tumbles

By Chua Kong Ho

Jan. 10 (Bloomberg) -- Asian stocks fell in the first week of 2009, extending last year’s rout, as the global recession cut earnings while Satyam Computer Services Ltd.’s false accounting rocked confidence in India’s corporate governance.

Lenovo Group Ltd. slumped 21 percent in Hong Kong after the personal computer maker forecast its first loss in three years. Shanghai Electric Group Co., China’s largest maker of power equipment, fell 18 percent after warning that 2008’s profit may miss its forecast. Satyam, India’s fourth-largest software- services provider, plunged 87 percent after the chairman said he inflated assets by $1 billion. India’s Sensitive Index led regional gauges lower.

“As we enter the earnings season, no good news can be expected,” said Yoji Takeda, managing about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Actual numbers and forecasts are likely to be even worse than investors expect.”

The MSCI Asia Pacific Index slid 0.3 percent to 89.85. The index fell 43 percent last year, the biggest annual loss on record, as the global economy sank into recession, hurting demand and forcing companies to cut jobs as profits slump.

Japan’s Nikkei 225 Stock Average fell 0.3 percent, snapping a four-week rally. South Korea’s Kospi Index ended the week 2 percent higher after the central bank cut interest rates to a record low, saying the economy is deteriorating “rapidly.”

Lenovo, Asustek

Lenovo, which bought International Business Machines Corp.’s PC division in 2005, fell 21 percent to HK$1.73. The PC maker expects to post a “material loss” in the quarter ended Dec. 31, the company said in a Jan. 8 statement. Lenovo will eliminate about 2,500 jobs, or about 11 percent of its entire workforce, leading to savings of about $300 million in the year ending March 2010, according to the statement.

Asustek Computer Inc., the world’s largest supplier of boards that connect computer components, lost 9.2 percent to NT$33.4 after saying it expects to post a loss in its Asus brand unit on lower-than-expected demand, excess inventories and currency fluctuations. Macquarie Group Ltd. and Credit Suisse Group cut the company’s rating to “underperform” from “neutral.”

Shanghai Electric slipped 18 percent to HK$2.66 after saying profit may be as much as 13 percent less than the 2.97 billion yuan ($434 million) forecast in November because customers asked for a delay in deliveries.

Satyam, India

Satyam Computer tumbled 87 percent to 23.75 rupees, the steepest drop on MSCI’s regional index, after Chairman Ramalinga Raju said Jan. 7 that he had falsified accounts and quit. Interim Chief Executive Officer Ram Mynampati said he can’t be sure whether the company has enough cash for this month. The statement prompted concern that other companies may disclose one-off items when they announce earnings over coming weeks.

DLF Ltd., India’s biggest real-estate developer, declined 28 percent to 216 rupees. Reliance Communications Ltd., the country’s second-largest mobile-phone company, fell 26 percent to 186.85 rupees. Jaiprakash Associates Ltd., India’s biggest builder of dams, slumped 22 percent to 68.5 rupees.

“We believe the Satyam incident marks a turning point in investors’ attitude towards corporate governance,” UBS AG analyst Suresh Mahadevan wrote in a Jan. 9 note.

Bumi, Indonesia

In Indonesia, PT Bumi Resources fell 31 percent to 630 rupiahs. BNP Paribas SA and PT Samuel Sekuritas followed JPMorgan Chase & Co., CLSA Ltd. and CIMB-GK Securities Pte. in downgrading their ratings on the stock, saying Asia’s largest power-station coal exporter was overpaying for acquisitions. Bumi announced this week three acquisitions valued at $565 million in total, raising concern the company will have to increase its debt.

Among stocks that rose, Sharp Corp., the world’s second- largest solar-battery maker, leapt 30 percent to 827 yen after saying Jan. 7 it will start producing solar panels early next year at a plant now under construction to meet growing demand.

Woori Finance Holdings Co. gained 23 percent to 7,700 won in Seoul. Its unit Woori Bank plans to seek about 3 trillion yuan ($2.3 billion) from a government-initiated fund to boost capital, the Korea Economic Daily reported Jan. 6.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net