Shanghai/Seoul: Asian stocks fell, extending a global rout, as the US treasury scrapped plans to buy mortgage assets, Commonwealth Bank of Australia said bad debts may double and China’s industrial output missed estimates.
Commonwealth Bank slumped 6% as treasury secretary Henry Paulson shifted the focus of the government’s $700 billion (about Rs34.2 trillion) bailout plan to consumer credit. BHP Billiton Ltd, the world’s largest mining company, dropped 12% after oil and metals prices sank. LG Display Co. Ltd and Sharp Corp. tumbled after being fined for price fixing and as Intel Corp. lowered its sales forecast. China Construction Bank Corp. fell 4.7% in Hong Kong after the nation’s factory production slowed.
Jittery: A man walks past an electronic stock indicator in Tokyo. Japan’s benchmark Nikkei 225 fell 5.3% to 8,238.64 on Thursday.
“Investors had expected corporate earnings and economic data to be bad, but the figures keep getting worse,” said Seo Jung Ho, who helps oversee $2.2 billion at UBS Hana Asset Management Co. Ltd in Seoul. “Paulson’s change in plans is making people wonder if our fears are coming true, that the financial crisis in the mortgage sphere is spreading to consumers.”
The MSCI Asia Pacific Index fell 4.8% to 82.32 at 7.32pm in Tokyo. The stock index has declined 48% this year, valuing it at 9.8 times reported earnings. That compares with 18 times for the Standard and Poor’s (S&P) 500 Index, and 8.9 times for Europe’s Dow Jones Stoxx 600 Index.
Futures on the S&P 500 fell 0.4%. Financial stocks led the US gauge down 5.2% on Wednesday, leaving it less than 0.5% above its lowest close in five years. Citigroup Inc. and the S&P 500 Financials Index slid to 12-year lows. The Stoxx 600 Index sank 3.3%. The MSCI World Index dropped 1.3% on Thursday, taking a three-day slide to 8.7%.
Most Asian markets slumped as Best Buy Co. Inc., the largest US electronics retailer, warned of a slowdown in spending, fuelling concern that corporate profits worldwide are declining. Dentsu Inc. and Asatsu-DK Inc., two of Japan’s biggest advertisers, lowered their profit forecasts.
Japan’s Nikkei 225 Stock Average dropped 5.3% to 8,238.64. The country’s economy is at risk of deteriorating further as the global financial turmoil slows growth worldwide, central bank board member Seiji Nakamura said on Thursday. Hong Kong’s Hang Seng Index lost 5.2%, led by HSBC Holdings Plc.
The International Monetary Fund said on 7 November the US, Europe and Japan may experience the first simultaneous recession in the post-World War II era.
The world is in for an extended period of sluggish growth, David Bonderman, founder of private equity firm TPG Inc., said in Hong Kong on Thursday. Central banks in the US, the UK and China are among those that have lowered benchmark interest rates to stimulate spending and growth.
China’s CSI 300 Index rose 4% on Thursday to the highest in three weeks. Dongfang Electric Corp. Ltd, the country’s No. 2 maker of power equipment, jumped 10% to 20.92 yuan after the government approved construction of 10 nuclear power plants.
US treasury and Federal Reserve officials are exploring a new “facility” to bolster the market for securities backed by assets, Paulson said.
Officials are considering using a portion of the $700 billion financial bailout money to “encourage private investors to come back to this troubled market”, he said.
Buying “illiquid” mortgage-related assets—the reason the Troubled Asset Relief Program was established a month ago—is no longer being considered, he said. Citigroup, Bank of America Corp., and Goldman Sachs Group Inc. dropped more than 9% each in US trading on Wednesday after Paulson’s comments.
In Sydney, Commonwealth Bank fell 6% to A$33, the lowest close since 25 January 2005. Australia’s biggest mortgage lender said bad debts may double this year due to lending to companies.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, lost 3.7% to 592 yen.
Mizuho Financial Group Inc., Japan’s second largest bank by revenue, slumped 6.6% to 254,500 yen (about $2,620). The company plans to sell about 300 billion yen of preferred securities to replenish capital depleted by rising bad loans and losses on stock investments.
Energy companies on the MSCI Asia Pacific Index lost 4.6% as a group, while raw material producers declined 7% collectively.
Melbourne-based BHP tumbled 12% to A$25, after scrapping a possible $4.5 billion nickel project in Indonesia.
PetroChina Co. Ltd, China’s largest oil producer, slumped 6.4% to HK$5.60 in Hong Kong.
Indian stock markets were closed on Thursday on account of a festival.
Eric Martina and Matt Miller in New York contributed to this story.