Asian Stocks Drop on Growth Concerns, Commodities; NEC Declines

By Patrick Rial and Satoshi Kawano

Oct. 22 (Bloomberg) -- Asian stocks slumped, snapping a two- day rally, as weaker earnings at companies including NEC Electronics Corp. and Singapore Petroleum Co. heightened concern the global economy is headed for a recession.

NEC Electronics plunged the most on record after reversing its profit forecast to a loss, causing parent NEC Corp. to drop 9.4 percent. Mitsubishi UFJ Financial Group Inc., Japan's largest listed bank, slumped 6.1 percent after a newspaper reported earnings probably dropped by half. Posco retreated 3 percent after announcing steel production cuts. Singapore Petroleum plunged after third-quarter profit tumbled 99 percent.

``Whether you are talking about the U.S. or over here, there is no escaping the drop-off we're going to have in profits,'' said Jun Morita, a fund manager at Chiba Bank Ltd. in Tokyo, which has $3.1 billion in tradable securities. ``The market is taking any bad news on earnings as a signal to sell.''

The MSCI Asia Pacific Index declined 2.5 percent to 90.39 as of 11:32 a.m. in Tokyo. The gauge rallied 6.2 percent in the past two days as money market rates dropped around the globe, boosting confidence the financial crisis is abating.

The index has plunged 43 percent this year, set for its worst annual performance since it was created in 1987, as credit market turmoil caused losses and writedowns of more than $660 billion at financial institutions and slowed global growth.

World's Cheapest

The slump has brought shares on the index to 1.2 times book value, making Asian equities cheaper than those in the U.S. and Europe. The S&P traded at 1.8 times book value, while stocks in Europe's Dow Jones Stoxx 600 Index are valued at 1.4 times.

Japan's Nikkei 225 Stock Average declined 2.9 percent to 9,041.07, led by Konica Minolta Holdings Inc., after the yen surged to a four-year high against the euro. Losses by South Korea's Kospi index were limited as Samsung Electronics Co. climbed after scrapping its bid for SanDisk Corp. Equity benchmark indexes throughout the region dropped.

Standard & Poor's 500 Index futures rose 0.5 percent in trading today after Apple Inc. posted a 26 percent gain in profit, beating estimates. U.S. stocks slid yesterday as companies from Texas Instruments Inc. to Freeport-McMoRan Copper & Gold Inc. reported profit and revenue that missed analysts' estimates. The S&P 500 Index lost 3.1 percent.

NEC Electronics, Japan's third-biggest chipmaker, tumbled 19 percent to 1,227 yen, the steepest fall since the stock was listed in July 2003.

Semiconductor Declines

The company yesterday said it will probably have a net loss of 8 billion yen ($79.8 million) this year because demand for semiconductors slumped, reversing an earlier forecast to break even. NEC, which owns 70 percent of the company, declined 9.4 percent to 337 yen.

Powerchip Semiconductor Corp., Taiwan's largest memory-chip maker, lost 3.4 percent to NT$4.61 after reporting a third- quarter loss that was more than double analysts' estimates after prices fell because of oversupply.

Samsung, the world's biggest computer-memory maker, rebounded from a loss to climb 0.4 percent to 521,000 won after saying it scrapped plans to buy SanDisk, citing ongoing turmoil in financial markets and the declining value of the target.

Toshiba Corp., which partners with SanDisk in flash memory production, jumped as much as 3.2 percent to 382 yen on relief the company won't be squeezed out of the market.

Bank Profits

Mitsubishi UFJ fell 6.1 percent to 797 yen. The bank's first-half profit may fall about 50 percent because of higher costs to dispose of bad loans and writedowns on its shareholdings, the Nikkei newspaper said today.

Closest rivals Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. may post earnings that are lower than their estimates, the newspaper said. Mizuho lost 4.7 percent and Sumitomo Mitsui sank 5.7 percent.

``We've only just started to see the impact of the growth slowdown on the real economy,'' said Angus Gluskie, who helps oversee A$450 million at White Funds Management in Sydney. ``The companies that have been reporting now haven't been materially impacted by the slowdown yet.''

Posco, the largest steelmaker in South Korea, tumbled 3 percent to 311,500 won. Nippon Steel Corp., the world's second- biggest producer, lost 5 percent to 323 yen. BlueScope Steel Ltd., Australia's largest steelmaker, slid 5.7 percent to A$4.47.

Posco said today it will slash output of stainless steel by about a third this quarter, reining in production to cope with a slowdown in demand. Shoji Muneoka, chairman of the Japan Iron & Steel Federation and president of Nippon Steel, said yesterday Japanese producers may lower output this quarter on slower demand.

Profit Plunge

Singapore Petroleum, the only refiner traded on the Singapore exchange, tumbled 14 percent to S$2.58, set for its biggest loss in a decade. Third-quarter profit plunged 99 percent from a year earlier as falling crude prices caused the company to write down the value of its inventory.

BHP Billiton Ltd., the world's biggest mining company, declined 4.7 percent to A$27.92 after the London Metal Exchange Index fell 3.3 percent to the lowest level since November 2005.

First-quarter iron ore output rose 15 percent, crude-oil and condensates output surged 43 percent, while production from Escondida -- the world's largest copper mine -- slumped 32 percent in the September quarter, BHP said today.

Sumitomo Metal Mining Co., Japan's biggest nickel maker, tumbled 7.2 percent to 798 yen after Credit Suisse Group cut its rating on the shares to ``neutral'' from ``outperform,'' citing lower forecasts for metals prices.

Stronger Yen

Konica Minolta, the world's second-largest maker of film used in liquid-crystal displays, tumbled 10 percent to 772 yen. The company sees an 850 million yen drop in operating profit for every 1 yen gain against the euro, according to KBC Securities. Olympus Corp., which generates more than a quarter of its sales in Europe, slumped 5.6 percent to 2,275 yen.

The yen strengthened to as much as 130.07 per euro today, the highest since June 2004. The stronger yen reduces the value of sales generated overseas.

Mazda Motor Corp., 33 percent owned by Ford Motor Co., dropped 7.4 percent to 263 yen on speculation Ford may unload its stake in the company to raise cash. Mazda also counts Europe as its second-largest market.

Hyundai Motor Co., South Korea's biggest, lost 3.4 percent to 56,400 won. Isuzu Motors Ltd., Japan's third-biggest maker of commercial vehicles, tumbled 8.1 percent to 193 yen.

Citic Tumbles

Citic Pacific Ltd. fell for a second day, declining 11 percent to HK$5.80, after falling 55 percent yesterday on the news that the unit of China's biggest state-owned investment company may lose as much as $2 billion on currency bets.

Hong Kong lawmakers urged regulators to investigate Citic Pacific's delay in disclosing its currency-hedging loss, the South China Morning Post said.

National Australia Bank Ltd., the nation's largest by assets, rose 3.7 percent to A$25.57. Australia & New Zealand Banking Group Ltd., the third biggest, gained 1.8 percent to A$19.19.

Australian funding costs fell for a third consecutive day as banks' deposits at the central bank dropped and the Reserve Bank of Australia pumped A$2.46 billion ($1.67 billion) into the financial system today.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned