Asian Stocks Slump to 5-Week Low on Machinery, U.S. Sales Slump

By Patrick Rial

Jan. 15 (Bloomberg) -- Asian stocks fell, dragging the regional benchmark index to a five-week low, after Japanese machinery orders and U.S. retail sales dropped at more than double the pace economists had estimated.

Advantest Corp., the world’s No. 1 maker of memory-chip testing equipment, lost 9.8 percent after machine orders sank by a record 16.2 percent. Samsung Electronics Co., the largest television maker globally, fell 6.1 percent after U.S. retail sales declined for a sixth month. Woori Financial Holdings Co. led South Korean banks lower as the won weakened and a government official said the nation’s growth would fall short of estimates. BHP Billiton Ltd. lost 6.6 percent after metals prices slumped.

The MSCI Asia Pacific Index declined 3.8 percent to 83.58 as of 7:20 p.m. in Tokyo, set for the lowest close since Dec. 8. All 10 industry groups on the gauge lost ground. The cost of protecting Asia-Pacific bonds from default rose, while the region’s currencies fell as investors fled equities.

“The market looks like it’s pointing down for now as investors are afraid of what could happen next,” said Hiroshi Chano, who helps manage the equivalent of $7.3 billion at Yasuda Asset Management Co. in Tokyo. “The market is really not very cheap when examined from an earnings standpoint.”

Japan’s Nikkei 225 Stock Average tumbled 4.9 percent to close at 8,023.31, the sharpest decline since Dec. 12. Banks and automakers dragged down South Korea’s Kospi index 6 percent, the biggest sell-off since Nov. 20. It led declines by major markets today. The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 3.5 percent to the lowest since Dec. 5.

Machinery Orders

Growth in the global economy will slow to 2.2 percent this year, a rate “equivalent to a global recession,” the International Monetary Fund said in November. Companies in the MSCI Asia benchmark reported an aggregate 32 percent drop in profit in the latest quarter, according to data compiled by Bloomberg. The gauge has given up more than a third of the gains it made since falling to a five-year low on Nov. 20.

U.S. stocks retreated the most in six weeks yesterday, with the Standard & Poor’s 500 Index losing 3.4 percent. Futures on the gauge fell 0.5 percent in trading today.

Advantest dropped 9.8 percent to 1,213 yen. Fanuc Ltd., the world’s No. 1 maker of industrial robots, lost 4.2 percent to 5,660 yen. Hitachi Construction Machinery Co., the largest maker of giant excavators, sank 9 percent to 1,006 yen.

Japan’s machine orders, an indicator of capital spending in the next three to six months, decreased 16.2 percent in November from the previous month, the Cabinet Office said today, the biggest decline since the current survey began in 1987. Economists had estimated an 8 percent slump.

Retail Sales

Samsung slid 6.1 percent to 459,500 won in Seoul, steepest drop since Oct. 24. Westfield Group, the world’s No. 1 shopping center owner by market value, slipped 2.5 percent to A$12.29 in Sydney.

U.S. retail sales dropped for a sixth month with a 2.7 percent slump in December, the longest stretch of declines since the tallies began in 1992, the Commerce Department said yesterday. That’s more than twice the drop economists had estimated.

“With demand dropping like an ebb tide, manufacturers have no choice but to cut investments,” said Hisakazu Amano, head of fund management at T&D Asset Management Co., which oversees about $39 billion. “U.S. retail sales will remain poor for quite some time; demand there will not recover easily.”

Konica Minolta Holdings Inc., a maker of printers and film for liquid-crystal displays, slumped 5.1 percent to 650 yen. The company’s film facilities aren’t running at full capacity as LCD makers reduce production during the slump, Ryohei Takahashi, an analyst at Merrill Lynch & Co. who lowered the stock to “neutral,” wrote in a report.

Deutsche Loss

Woori Financial, operator of South Korea’s second-largest bank, plunged 11 percent to 7,560 won. Mizuho Financial Group Inc., Japan’s third-biggest listed bank by assets, retreated 5.5 percent to 240 yen. Fubon Financial Holding Co., Taiwan’s second- largest listed financial services company by market value, declined 6.9 percent to NT$20.25.

Deutsche Bank AG, Germany’s biggest lender, yesterday reported a record loss in the fourth quarter, and the New York Times reported Citigroup Inc. may have trouble unloading some assets as it tries to streamline operations.

Mitsubishi UFJ Financial Group Inc. fell 1.5 percent to 516 yen. Japan’s biggest lender by value said after the close of trading it will record a 288 billion yen ($3.2 billion) charge for stock holdings that have dropped in value, which may force the bank to post its first loss since forming in 2005.

Bond Risk

South Korean financial shares were also hurt as the won weakened to the lowest in a month against the dollar, raising the cost of servicing foreign-currency debt. Vice Finance Minister Bae Kook Hwan said the country’s economic growth in 2009 is likely to fall short of central bank and IMF predictions.

Seven of Asia’s 10 most-active currencies, excluding the yen, declined versus the greenback, with the Malaysian ringgit and Taiwan dollar also reaching one-month lows.

The Markit iTraxx Australia index of credit-default swaps widened 15 basis points to 325 as of 3:09 p.m. in Sydney, Westpac Banking Corp. prices show, while the benchmark gauge for Japan rose 10.5 basis points to 305 at 1:05 p.m. in Tokyo, according to Credit Suisse Group AG. Nortel Networks Corp., the phone equipment maker that was once Canada’s largest company by market value, filed for bankruptcy yesterday, triggering about $1.5 billion of derivatives protecting against a default on the company’s bonds.

Hyundai, Kia

BHP, the world’s largest mining company, lost 6.6 percent to A$28.90 after agreeing to higher copper processing fees. Rio Tinto Group, the third largest, plunged 8.2 percent to A$37.30 after appointing steel executive Jim Leng to replace Chairman Paul Skinner and saying iron ore output declined 18 percent in the fourth quarter as steelmakers idled furnaces.

Australia’s Alumina Ltd., partner in the world’s biggest producer of the material used to make aluminum, lost 8.5 percent to A$1.29. Jiangxi Copper Co., China’s second-biggest smelter, fell 2.5 percent to HK$5.75.

A measure of six metals traded on the London Metal Exchange, declined 2.5 percent yesterday, as prices for nickel, copper and aluminum fell.

Hyundai Motor Co. slid 10 percent to 43,000 won, the steepest drop since Nov. 24, while Kia Motors Corp. lost 11 percent to 6,950 won. South Korea’s biggest carmakers had their debt ratings cut to junk levels by Fitch Ratings as the deepening global recession curbs auto sales.

Nine Dragons Paper (Holdings) Ltd., China’s biggest maker of containerboard paper for packaging, plunged 9.7 percent to HK$1.67 after saying it will post a “substantial reduction” in profit for the six months to Dec. 31 on higher raw-material costs and lower selling prices.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net.