Asian Stocks Drop to Five-Year Low; Nomura Slumps on Share Sale

By Shani Raja and Toshiro Hasegawa

Feb. 24 (Bloomberg) -- Asian stocks fell, dragging the regional benchmark index to the lowest in more than five years, as the deepening global recession hurts company earnings and forces companies to sell shares.

Nomura Holdings Inc., Japan’s largest brokerage, slumped 9.3 percent on concern it will sell $3.1 billion of stock at a discount. PetroChina Co., China’s largest oil producer, lost 4.6 percent in Hong Kong after crude oil dropped. Suncorp-Metway Ltd., Australia’s third-largest general insurer, declined 4.8 percent as its first-half profit tumbled.

“Pessimism about company earnings hasn’t yet run its course,” said Naoyuki Torii, general manager of equities at Fukoku Mutual Life Insurance Co., which manages about $59 billion. “As massive losses are eating into companies’ capital, investors are expecting more businesses will sell new shares and dilute shareholders’ equity.”

The MSCI Asia Pacific Index fell 1.8 percent to 74.90 at 4:06 p.m. in Tokyo, set for its lowest close since Aug. 28, 2003. The MSCI World Index declined for an 11th day. The slump has wiped at least $2.7 trillion off the value of global stocks even as the U.S., China and Australia passed stimulus policies to bolster their economies.

Japan’s Nikkei 225 Stock Average lost 1.5 percent to 7,268.56. A close below 7,162.90 today would have been the lowest since October 1982. Hong Kong’s Hang Seng Index slumped 3.2 percent, while South Korea’s Kospi Index dropped 3.2 percent. All markets fell except Malaysia.

Baoshan Iron & Steel Co., China’s largest steelmaker, slid 5.6 percent after UBS AG said producers had overestimated demand. Engineering company Ausenco Ltd. slumped 19 percent in Sydney after saying clients had canceled projects. Modec Inc., which makes offshore oil and gas equipment, plunged by 20 percent in Tokyo as it forecast profits to tumble.

Deeper Recession

Futures on the U.S. Standard & Poor’s 500 Index added 0.9 percent, following the benchmark index’s 3.5 percent slide to the lowest level since April 1997 yesterday. U.S. regulators said they will begin examining which banks have enough capital to survive a deeper recession. Banks that need more funds and cannot raise the money from private investors will be able to tap taxpayer funds.

The MSCI Asia Pacific Index has lost 49 percent in the past year as the global slowdown worsened, cutting the average valuation of companies on the gauge by 10 percent to 13 times reported profit. Advanced economies are already in “depression”, IMF Managing Director Dominique Strauss-Kahn said this month.

“The economics statistics aren’t that flash at the moment and the market remains quite nervous,” said Paul Xiradis, who manages the equivalent of $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “There’s no doubt good value, but the momentum is still negative.”

‘People Are Nervous’

Thailand’s government said yesterday the economy shrank 4.3 percent, pushing the country closer to its first recession in a decade. Economists in a Bloomberg survey expect Hong Kong to say tomorrow its economy contracted in the same period by the most since 2003.

Nomura slumped 9.3 percent to 420 yen. The company will sell shares valued at as much as 291.2 billion yen ($3.1 billion) to replenish capital eroded by four-straight quarterly losses, according to filings to the Ministry of Finance yesterday. Nikko Citigroup Ltd. cut its share price estimate for Nomura by more than a third to 530 yen with a “hold” rating.

“Investors are dumping risk assets and flocking to cash amid heightening uncertainty,” Mamoru Shimode, a Tokyo-based equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. “People are nervous about companies’ financial health.”

Profit Concerns

PetroChina declined 4.6 percent to HK$5.66 after oil futures declined 4 percent to $38.44 a barrel in New York yesterday on concern the global economic slump will cut demand for fuels. Cnooc Ltd., China’s biggest offshore oil company, dropped 4.4 percent to HK$6.71. BHP Billiton Ltd., Australia’s largest oil producer, lost 1.2 percent to A$28.97.

Suncorp fell 4.8 percent to A$4.75 after saying first-half profit slumped 33 percent. The company slashed its dividend for the period to 20 Australian cents a share, down from 52 cents a year earlier.

Baoshan Iron slid 5.6 percent to 5.71 yuan in Shanghai after a UBS report said global steelmakers have raised output too quickly in response to a bounce in Chinese demand. Australia’s BlueScope Steel Ltd., which said yesterday it may have a second-half loss, slumped 8.3 percent to A$2.55.

Ausenco, based in the Australian city of Brisbane, plummeted 19 percent to A$2.05 after saying some clients had sought to extend the timing of new projects.

In Tokyo, Modec tumbled 20 percent to 1,207 yen. The company said it expects operating profit, or sales minus the cost of goods sold and administrative expenses, of 500 million yen for the year started Jan. 1, compared with 1.97 billion yen in the year just ended.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.