Asian Stocks Drop on ANZ Banking Share Sale, Lower Metal Prices

By Jonathan Burgos and Shani Raja

May 28 (Bloomberg) -- Asian stocks fell, led by banks and mining companies, after Australia & New Zealand Banking Group Ltd. sold shares and metal prices declined.

ANZ Banking, Australia’s fourth-largest lender, dropped 1.9 percent after selling shares at a discount. Nomura Holdings Inc., Japan’s biggest brokerage, lost 1.3 percent after Moody’s Investors Service lowered its credit rating. BHP Billiton Ltd., the world’s No. 1 mining company, sank 2 percent. Stocks also fell after a surge in bond yields sparked concern households and businesses will face higher debt burdens.

“A lot of companies are taking advantage of the better market sentiment to raise capital by selling equity,” said Ivan Tham, Singapore-based head of funds management at the state- backed Kuwaiti Finance House, which has about $24 billion in assets. “The question is whether liquidity in the market can absorb all these equity issues. I’m struggling to find value in the market.”

The MSCI Asia Pacific Index fell 0.9 percent to 99.90 at 11:25 a.m. in Tokyo. The gauge has risen 42 percent since falling to a more than five-year low on March 9 on speculation the worst of the economic crisis had passed.

Japan’s Nikkei 225 Stock Average lost 0.1 percent as the government said retail sales in the country fell for an eighth month. Australia’s S&P/ASX 200 Index dropped 1.4 percent, while Singapore’s Straits Times Index sank 1.3 percent.

Shipping stocks in the region gained, led by STX Pan Ocean Co.’s 5.9 percent surge in Seoul as cargo rates climbed. Japan Tobacco Inc. slumped 4.3 percent on plans to sell bonds.

Borrowing Costs

Futures on the Standard & Poor’s 500 Index were little changed. The gauge dropped 1.9 percent in New York yesterday, the biggest slide in two weeks, as Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the asset quality of U.S. banks remains a “major concern.”

The MSCI Asia Pacific Index has lost 32 percent in the past 12 months as the deepening credit crisis caused losses at the world’s biggest financial institutions to swell to almost $1.5 trillion, according to data compiled by Bloomberg.

The yield on 10-year U.S. Treasuries dropped two basis points today, according to data compiled by Bloomberg. Yields surged 19 basis points yesterday, the most since Jan. 19, sparking concern yields on mortgage bonds will increase.

“The real concern hanging over markets globally is that high borrowing costs are going to derail any economic recovery,” said Ben Potter, a Melbourne-based analyst at IG Markets. “People are concerned government efforts aren’t going to be able to bring down those costs.”

Shipping Rally

ANZ Banking Group dropped 1.9 percent to A$15.27 in Sydney after a one-day trading halt. The company sold A$2.5 billion ($1.9 billion) of shares at A$14.40 each, a 7.5 percent discount to the previous closing price, to fund its bid for Royal Bank of Scotland Plc’s Asian assets.

Nomura lost 1.3 percent to 710 yen. Moody’s lowered the company’s credit rating by two levels to Baa2, as the financial crisis hurt earnings.

Sony Corp., the maker of PlayStation 3 game machines, fell 0.6 percent to 2,460 yen. The company had its debt rating cut one level by Moody’s to A3 on concern slowing demand, increased competition and the stronger yen will erode earnings.

BHP declined 2 percent to A$33.95. Rio Tinto Ltd., the world’s third-biggest mining company, lost 1 percent to A$63.74. A gauge of six metals in London fell 1 percent yesterday. Copper futures in New York sank 1.2 percent today, adding to yesterday’s 0.9 percent drop.

Baltic Dry

STX Pan Ocean, South Korea’s biggest bulk carrier, jumped 5.9 percent to 12,500 won. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping company, added 0.8 percent to 404 yen. Its bigger rival Mitsui O.S.K Lines Ltd. gained 1.4 percent to 640 yen.

The Baltic Dry Index, a measure of shipping costs for commodities, climbed 7.6 percent in London yesterday, its 18th- straight day of gains. The measure surpassed 3,000 points for the first time since October, buoyed by Chinese demand for iron ore.

Japan Tobacco slumped 4.3 percent to 274,600 yen. The company set terms for a 100 billion yen ($1.04 billion) sale of five-year, 1.128 percent bonds at par, according to a Nomura Securities Co. banker who is managing the deal.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.