Asian Stocks Fall After Fitch Says Europe Crisis Threatens U.S. Banks

By Yoshiaki Nohara - Nov 17, 2011 9:49 AM GMT+0700

Asian stocks fell for a third day, with the regional benchmark heading for its lowest close in four weeks, after Fitch Ratings said a worsening European debt crisis poses a “serious risk” to U.S. banks, stoking concern about the global financial system.

Standard Chartered Plc. (2888), the U.K.’s No 2 lender by market value, fell 3.6 percent in Hong Kong. Esprit Holdings Ltd. (330), a clothier that counts Europe as its biggest market, dropped 5 percent. Olympus Corp. jumped 13 percent after a report Japan’s top banks would continue to support the scandal-hit company.

The MSCI Asia Pacific Index slid 0.6 percent to 115.49 as of 11:12 a.m. in Tokyo, with about two stocks falling for each that rose. The gauge headed for its lowest close since Oct. 20.

“This is a bad case for Europe and growth forecasters who were optimistic are definitely cutting back,” said Matt Riordan, who helps manage close to $6.4 billion in Sydney at Paradice Investment Management Pty. “We are going into quite a difficult point where some sort of a new strategy might be required.”

Futures on the Standard & Poor’s 500 Index were unchanged today. The index dropped 1.7 percent in New York yesterday after Fitch said further turmoil in Greece, Ireland, Italy, Portugal and Spain poses a “serious risk” to U.S. lenders. The risks are currently manageable, the ratings company said.

Stocks also fell after Bank of England Governor Mervyn King said Britain faces a “markedly weaker” economic outlook.

China Can’t Ease

Japan’s Nikkei 225 (NKY) Stock Average lost 0.3 percent. Australia’s S&P/ASX 200 was little changed, while South Korea’s KOSPI Index slid 0.4 percent.

Hong Kong’s Hang Seng Index dropped 1.4 percent after China’s central bank said it can’t loosen control over prices and reiterated Premier Wen Jiabao’s pledge to “fine-tune” policies when needed.

Banks dropped. Standard Chartered fell 3.6 percent to HK$160.50. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, dropped 0.9 percent to 328 yen, and Sumitomo Mitsui Financial Group Inc. (8316), the nation’s second- biggest bank, fell 0.7 percent to 2,085 yen. National Australia Bank Ltd. (NAB), the country’s third-biggest lender by market value, dropped 1.4 percent to A$24.26.

“The problem really resides with the European banking sector,” saidKhiem Do, Hong Kong Kong-based head of multi- asset strategy at Baring Asset Management Ltd., which oversees about $49 billion. “Something has to happen in terms of the policy regarding the sovereign debt issue in Europe, otherwise I’m afraid equity market indices might revisit their lows.”

Olympus Rebounds

Exporters related to Europe fell. Esprit dropped 5 percent to HK$9.13. Nissan Motor Co., Japan’s third-largest carmaker by market value, fell 0.9 percent to 688 yen.

Olympus Corp. (7733) jumped 13 percent to 835 yen after the Mainichi newspaper reported Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group yesterday told the optical equipment maker they will continue to support the company. Separately, the Nikkei newspaper reported the company told creditors it plans to cut debt to 260 billion yen ($3.37 billion) over three years.

The MSCI Asia Pacific Index declined 16 percent this year through yesterday, compared with a 1.7 percent drop by the S&P 500 and a 14 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.5 times for the S&P 500 and 10.3 times for the Stoxx 600.

Energy companies rose after crude for December delivery rose 3.2 percent to $102.59 a barrel yesterday on the New York Mercantile Exchange.

BHP Billiton Ltd. (BHP), an Australian miner and oil producer, rose 0.6 percent to A$36.85. Inpex Corp. (1605), Japan’s No. 1 energy explorer, advanced 2.4 percent to 498,000 yen.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.