Asian Stocks Post Biggest Weekly Drop Since October on Economy

By Patrick Rial

Feb. 21 (Bloomberg) -- Asian stocks posted the biggest weekly decline since October as the weakening global economy assailed corporate profits.

Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, plunged 9.1 percent after the nation’s economy contracted at the fastest pace since 1974. Woori Finance Holdings Co., controlling South Korea’s second-largest bank, slumped 17 percent after rising bad loans forced it to apply for state funds. Elpida Memory Inc., Japan’s largest memory chipmaker, tumbled 27 percent after Standard & Poor’s slashed the company’s debt rating, citing its liquidity risk.

“There’s no magic potion we can all drink and cure the ills that the global economy has at the moment,” said Tim Schroeder, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “The evidence shows any pickup is going to be muted, and that profitability is not going to recover meaningfully for some time.”

The MSCI Asia Pacific Index plunged 7.0 percent this week to 76.03, the steepest slide since the period ending Oct. 24. The gauge has plunged 15 percent in 2009 and is less than 2 percent from a six-year low.

Japan’s Topix Index dropped 3.3 percent as it tumbled to the lowest since January 1984. All of the region’s benchmark equity indexes slumped, except in Pakistan. South Korea led the region’s declines as financial and heavy industry companies sent the Kospi Index to an 11 percent slide.

Falling Estimates

MSCI’s Asian index slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid falling profits. Earnings estimates for companies in the gauge have been slashed 44 percent since the beginning of 2009, bringing them to the lowest level since Bloomberg began compiling the data in 2005.

Mitsubishi UFJ lost 9.1 percent to 429 yen. Pioneer Corp., Japan’s No. 3 audio-visual equipment maker, dropped 25 percent to 106 yen after announcing 10,000 job cuts as the global recession forced the company to exit the television business. Brewer Sapporo Holdings Ltd. retreated 20 percent to 334 yen after Warren Lichtenstein’s Steel Partners gave up a bid to acquire a one-third stake.

The Japanese economy contracted at a 12.7 percent annual rate in the final three months of 2008, the most since the 1974 oil shock, according to figures from the Cabinet Office. A plunge in exports accounted for most of the decline.

South Korean Banks

Woori Finance dropped 17 percent to 6,070 won. The bank said it plans to raise more than 2 trillion won ($1.4 billion) from a state-backed recapitalization fund as the nation’s slowing economy pushes bad loans higher. Rival Hana Financial Group Inc. declined 18 percent to 16,700 won. Shinhan Financial Group Ltd. tumbled 14 percent to 22,900 won.

The cost for South Korean banks to borrow dollars in the swap market rose to a record, increasing the burden on banks with as much as $160 billion of external debt maturing over the next two years.

Elpida lost 27 percent to 512 yen after S&P lowered the company to B+ from BB-, citing the continual drain on cash as losses on memory chips erode the company’s financial position. Hynix Semiconductor Inc., the world’s second-largest computer- memory chipmaker, fell 15 percent to 7,880 won in Seoul. The stock was slashed to “underweight” from “neutral” by J.J. Park at JPMorgan on the view that demand for memory won’t recover in the second half of this year, pushing prices lower even as companies cut supply.

Danamon Rallies

PT Bank Danamon Indonesia, backed by Temasek Holdings Pte and Deutsche Bank AG, rallied 19 percent to 2,650 rupiah. The lender plans to raise 4 trillion rupiah ($332 million) selling shares in a rights offer, a move that Macquarie Group Ltd. said will help fuel medium-term growth.

OZ Minerals Ltd., the world’s second-largest zinc mining company, surged 18 percent to 65 cents in Sydney after being suspended since November following a A$2.6 billion ($1.7 billion) takeover bid from China Minmetals Corp.

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