BL: Asian Stocks Decline to Two-Month Low; Macquarie, ICBC Tumble
By Chua Kong Ho
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June 10 (Bloomberg) -- Asian stocks fell, driving the benchmark index to a two-month low, as widening credit-market losses and the prospect of higher borrowing costs fanned concern earnings will decline.
Macquarie Group Ltd. and Babcock & Brown Ltd. plunged in Sydney after Lehman Brothers Holdings Inc. reported a $2.8 billion loss and Federal Reserve Chairman Ben S. Bernanke said policy makers will ``strongly resist'' inflation. Industrial & Commercial Bank of China Ltd. tumbled after the nation's banks were ordered to increase reserves for the fifth time this year.
``It's going to take several years before the credit problems work themselves through the system,'' said Robert Rountree, Singapore-based director of investment marketing at Prudential Asset Management, which oversees $55 billion of assets in Asia. ``Markets are reacting to the fear factor of rising interest rates.''
The MSCI Asia Pacific Index lost 1.8 percent to 144.63 at 1:05 p.m. in Tokyo, poised for its lowest since April 18. More than four stocks dropped for each that rose. All 10 industry groups declined, with a measure of financial stocks down the most.
Japan's Nikkei 225 Stock Average retreated 0.8 percent to 14,071.01. South Korea's Kospi Index fell 1.8 percent. The country's entire cabinet including Prime Minister Han Seung Soo offered to resign to take responsibility for the government's handling of beef imports.
Australia's S&P/ASX 200 Index lost 2.4 percent, set for its biggest decline since March 20. China's CSI 300 Index dropped 6.5 percent to the lowest since April 2007. Hong Kong's Hang Seng Index slumped 3.4 percent.
Catching Up
Australia, China and Hong Kong were closed yesterday for holidays, when MSCI's Asian gauge lost 2 percent after crude oil surged more than $10 a barrel on June 6 and U.S. unemployment jumped the most since 1986.
The benchmark Asian index has dropped 8 percent this year amid signs of slowing expansion in the U.S. and $389 billion of writedowns and credit losses.
Most U.S. stocks declined yesterday, led by banks and technology companies, after speculation the Fed will raise interest rates overshadowed improving sales at McDonald's Corp. and a rally in energy producers. Financial shares fell 2.3 percent to a five-year low. Standard & Poor's 500 Index futures dropped 0.4 percent recently.
Bernanke, speaking late yesterday in Boston, pledged to ``strongly resist'' any waning of public confidence in stable prices. He said the risk of a ``substantial downturn'' in U.S. economic growth has diminished, prompting traders to increase bets that policy makers will raise interest rates.
Banks Decline
His comments helped drive U.S. Treasuries down, with two- year yields rising half a percentage point in two days to their highest since January.
Macquarie Group slumped 7.5 percent to A$51.78, the most since March 13. Babcock & Brown, Australia's second-largest investment company, tumbled 7.9 percent to A$10.35.
Lehman, the fourth-largest U.S. securities firm, raised $6 billion to help survive the collapse of the mortgage market after reporting a second-quarter loss. The European Central Bank said yesterday large European banks face ``dampened'' profits and more asset writedowns, putting the financial system at more risk than six months ago.
HSBC Holdings Plc, Europe's biggest bank, fell 2.1 percent to HK$128.60 in Hong Kong.
China's banks tumbled after the central bank said they must put aside a record 17.5 percent of deposits as reserves from June 25. It's the fifth time this year that policy makers have raised the reserve ratio to curb inflation at close to a 12-year high.
ICBC, China Merchants
Industrial & Commercial Bank, the country's largest, tumbled 6.3 percent to 5.50 yuan, the most since Jan. 22. Shanghai Pudong Development Bank Co. dropped 8.2 percent to 26.27 yuan and China Merchants Bank Ltd. tumbled 8.2 percent to 25.82 yuan.
In Sydney, Foster's Group Ltd. rose 3.7 percent to A$5.59, the most since May 15. Chief Executive Officer Trevor O'Hoy quit after Australia's beer and winemaker cut earnings forecasts and said it will write off as much as A$770 million ($730 million) at its wine unit.
PT Indosat, Indonesia's second-largest phone company, surged 20 percent to 6,750 rupiah, the most in more than nine years, after Qatar Telecom QSC agreed to pay S$2.4 billion ($1.8 billion), a 31 percent premium, for a controlling stake.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Last Updated: June 10, 2008 00:27 EDT
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