Asian Stocks, U.S. Futures Decline on Renewed Bank Concerns

By Patrick Rial

March 30 (Bloomberg) -- Asian stocks fell, paring the MSCI World Index’s biggest monthly rally since 1991, and U.S. futures slumped as U.S. Treasury Secretary Timothy Geithner said some banks will need “large amounts” of government aid.

Mizuho Financial Group Inc., Japan’s second-largest listed bank, lost 8.8 percent after Goldman Sachs Group Inc. told investors to sell the shares. Aluminum Corp. of China Ltd. tumbled 11 percent after saying profit plunged. BHP Billiton Ltd., the world’s No. 1 mining company, dropped 4.3 percent in Sydney after oil and copper prices fell. Stocks extended declines as the U.S. said General Motors Corp. and Chrysler LLC must overhaul recovery plans to justify further taxpayer aid.

“We’re seeing the brakes being put on the rally,” said Naoteru Teraoka, who helps oversee $21 billion at Tokyo-based Chuo Mitsui Asset Management Co. “Everyone knows the economic fundamentals are horrid, so the challenge becomes predicting when we’ll see a recovery.”

The MSCI Asia Pacific Index lost 3.5 percent to 82.53 as of 2:45 p.m. in Tokyo, following a five-day, 7.5 percent jump that took valuations to the highest since December 2007. Japan’s Nikkei 225 Stock Average slipped 3.8 percent to 8,298.53, while Hong Kong’s Hang Seng Index declined 3 percent. Benchmark indexes throughout the region dropped.

Esprit Holdings Ltd., a clothing retailer, slumped 10 percent in Hong Kong after a newspaper reported the company’s chief executive officer will step down. China Petroleum & Chemical Corp., Asia’s biggest refiner, slipped 2.6 percent on a slump in profit. Alesco Corp., which makes building materials and home products, soared 22 percent in Sydney after saying it’s considering selling a unit.

‘Sell’ U.S. Stocks

Futures on the Standard & Poor’s 500 Index dropped 1.9 percent. The gauge slumped 2 percent on March 27. Investors should sell U.S. stocks because earnings are likely to keep weakening, according to a Morgan Stanley report. The Standard & Poor’s 500 Index rose 21 percent in the past 14 trading days, the most since 1938, according to data compiled by New York- based S&P analyst Howard Silverblatt.

MSCI’s Asian benchmark gauge has climbed 9.8 percent in March, as governments from the U.S. to Japan widened measures to ease the global financial crisis and revive economic growth. The monthly gain was the most since June 1999. The MSCI World Index has risen 9.1 percent this month, the most since October 1990.

The 30 members of the Organization for Economic Cooperation and Development are likely to see their economies contract by 4.2 percent this year, the group’s Secretary General Angel Gurria said on March 27. Japanese industrial production fell 9.4 percent in February from the previous month, government data showed today, the longest streak of declines since 2001.

Bank Shares Decline

“The fundamentals of the global economy still remain very weak, and I can’t yet draw any rosy outlook,” said Hisakazu Amano, head of fund management at Tokyo-based T&D Asset Management Co., which oversees about $39 billion.

Mizuho retreated 8.8 percent to 197 yen after Goldman Sachs lowered the stock to “sell” from “neutral.” The bank is among the most expensive in Japan based on book value and its high level of stock investments makes it especially risky, analyst Toyoki Sameshima wrote in a report.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by value, lost 7.4 percent to 488 yen. National Australia Bank Ltd., Australia’s largest by assets, declined 1.4 percent to A$20.79.

A gauge of financial stocks included in the MSCI Asia Pacific Index slumped 5 percent. It lost 30 percent in the last six months, the worst performer among 10 industry groups.

‘Tougher’ Month

“Some banks are going to need some large amounts of assistance,” the Treasury’s Geithner said yesterday on the ABC News program “This Week.” Geithner announced this month a plan shore up the nation’s banks with a public-private partnership to finance the purchase of illiquid real-estate assets.

JPMorgan Chase & Co.’s Chief Executive Officer Jamie Dimon said in an interview with CNBC that March was a “little tougher” than January and February for the bank. Kenneth Lewis, Bank of America Corp.’s CEO, said the lender’s trading book wasn’t as good as in the first two months. The two said earlier this month that their banks were profitable through February, excluding taxes and provisions, contributing to advances in financial shares.

Shares in the MSCI Asia Pacific Index traded at 17 times trailing earnings on March 27, according to data compiled by Bloomberg, the most expensive since December 2007.

Slumping Profit

Aluminum Corp. of China, the country’s biggest maker of the metal, dropped 11 percent to HK$4.62. President Luo Jianchuan said the company will cut capital spending by 34 percent this year and limit spending on acquisitions after saying yesterday profit fell 99.9 percent in 2008.

China Petroleum & Chemical Corp., Asia’s biggest refiner, lost 2.6 percent to HK$4.85 after reporting a 47 percent slide in net income for 2008. The company said first-quarter profit may surge more than 50 percent after the government relaxed fuel-price controls and crude oil costs fell.

BHP tumbled 4.3 percent to A$32.55. Sims Metal Management Ltd., the world’s biggest recycler of scrap metal, lost 7.6 percent to A$17.50 after Goldman Sachs recommended investors sell the shares.

Crude oil for May delivery slumped 3.6 percent to $52.38 a barrel in New York on March 27, and slid as much as 2.4 percent today. A measure of six metals traded on the London Metal Exchange, including copper and zinc, lost 1 percent.

Esprit slumped 10 percent to HK$38.05. The company’s CEO Heinz Krogner plans to step down, Frankfurter Allgemeine Sonntagszeitung reported on March 28, without saying where it got the information or giving a reason for the resignation.

Alesco jumped 22 percent to A$1.97. The company said today in a regulatory filing that it’s considering the sale of its scientific and medical unit, Biolab.

Kawasaki Kisen Kaisha Ltd. plunged 9.1 percent to 308 yen. Mitsui O.S.K. Lines Ltd., Japan’s second-biggest bulk shipper, lost 7.9 percent to 493 yen. The Baltic Dry Index lost 2.1 percent on March 27, the 13th straight decline for the benchmark measure of shipping costs for commodities.

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