By Patrick Rial
Feb. 17 (Bloomberg) -- Asian stocks slumped, dragging the benchmark index down by the most in three weeks, and U.S. futures fell on concern the deepening global recession will drive up funding costs and hurt trade. Treasuries gained.
Woori Finance Holdings Co., which yesterday applied for state funding, dropped 4.1 percent as the cost for South Korean banks to borrow dollars rose to a record. T&D Holdings Inc., Japan’s largest publicly traded life insurer, plunged 8.5 percent as the Australian unit of Axa SA reported a loss and said markets remain “challenging.” Hynix Semiconductor Inc. lost 4.8 percent after JPMorgan Chase & Co. said memory-chip prices will fall and downgraded the stock to “underweight.”
“We are living in extraordinary times with the severe dislocation and losses in investment markets over the last 12 months,” said Andrew Penn, Chief Executive Officer at Axa Asia Pacific Holdings Ltd.
The MSCI Asia Pacific Index declined 2.6 percent to 79.11 as of 1:16 p.m. in Tokyo. Eight stocks dropped for each that advanced on the measure, which fell the most since Jan. 23. The gauge has lost 12 percent this year, extending 2008’s record 43 percent tumble, as the credit crisis dragged the world’s biggest economies into recession.
The Nikkei 225 Stock Average lost 1.6 percent to 7,629.81, while Hong Kong’s Hang Seng Index slumped 3 percent. All Asian markets declined.
Brambles Ltd., the world’s biggest supplier of pallets, tumbled 14 percent in Sydney on brokerage downgrades. Also in Australia, papermaker Paperlinx Ltd. almost doubled after agreeing to sell a unit, and OZ Minerals Ltd. jumped 17 percent after receiving a takeover bid from China Minmetals Corp.
Insurers Slump
Futures on the U.S. Standard & Poor’s 500 Index fell 1.6 percent. Stocks there resume trading today after a holiday yesterday. Treasuries rose, dragging yields on 10-year notes down by eight basis points, as renewed concerns about the global economy prompted investors to seek safer assets.
“Sentiment in the market is still a little bit fragile,” said Khiem Do, a Hong Kong-based strategist for Baring Asset Management (Asia) Ltd., which oversees $6 billion. “The global trade data will continue to be weak because most economies are forecasting a recession this year.”
A gauge of finance companies on MSCI’s Asian index dropped 3.5 percent, the most of 10 industry groups. The finance measure is the worst performer in the past 12 months as the credit crisis caused losses at institutions worldwide to swell to more than $1 trillion.
Government Aid
Stocks have fallen in the past year as the world’s largest economies sank into recession, dragging the average valuation of companies on MSCI Asian gauge down by 10 percent to 13 times reported profit.
Woori retreated 4.1 percent to 6,740 won. The bank said yesterday 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.
Shinhan Financial Group Co., which controls the third- largest bank in South Korea, lost 4 percent to 25,200 won. KB Financial Group Inc., the holding company for Kookmin Bank, lost 4.5 percent to 30,700 yen.
The one-year cross-currency swap rate on the won slumped to a record minus 1.6 percent today from minus 1.3 percent yesterday, before trading at minus 1.1 percent. A minus figure shows borrowers of dollars need to make interest payments.
Declines by Asian insurers followed an 11 percent drop yesterday by the U.K.’s Legal & General Group Plc, amid speculation the 173-year-old British insurer may have to cut its dividend to boost capital reserves. The U.K.’s Financial Services Authority yesterday asked the industry to assess how well they can withstand market shocks.
Insurers Tumble
T&D slumped 9.7 percent to 2,010 yen. The stock was downgraded to “underweight” from “neutral” by HSBC Holdings Plc on Feb. 13 due to the falling value of investment securities.
Axa Asia Pacific, a unit of France’s biggest insurer, fell 7.8 percent to A$3.78 in Sydney after reporting a A$372.9 million ($242 million) loss for the six months ended Dec. 31.
“It seems unlikely that the environment will improve in the short term such that 2009 will also be challenging for our industry,” CEO Penn said.
Hynix, the world’s second-largest computer-memory chipmaker, retreated 5.9 percent to 8,420 won. 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.
Elpida Memory Inc., Japan’s largest memory chipmaker, plummeted 11 percent to 586 yen. Samsung Electronics Co., the world’s biggest, lost 2.8 percent to 490,000 won.
Takeover Offer
Brambles tumbled 14 percent to A$4.85. The stock was downgraded at Bank of America, JPMorgan and Macquarie Group Ltd. a day after the company reported a 28 percent decline in first- half profit.
Paperlinx soared 97 percent to 64 cents. Nippon Paper Group Inc., Japan’s second-largest papermaker, agreed to acquire Paperlinx’s Australian manufacturing unit for A$600 million to expand outside its shrinking domestic market.
OZ Minerals, the world’s second-largest zinc mining company, rallied 17 percent to 64.5 cents in Sydney after a A$2.6 billion takeover bid from China Minmetals Corp. The stock had not traded since Nov. 27. State-owned Minmetals agreed to pay 82.5 cents a share for OZ Mineral.
To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net.
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