Most Asian stock markets fell, led by material producers and finance companies, on increasing signs the deepening global recession is hurting corporate profits.
The MSCI Asia Pacific Index fell 0.2 percent to 89.40 as of 4:54 p.m. in Tokyo. The measure has lost 43 percent this year, the worst annual performance in its two-decade history, as the credit crisis dragged the world’s biggest economies into recessions. The decline has taken the average valuation of companies on the gauge to 12.8 times estimated profit, more than a quarter below the level at the start of this year.
Losses and writedowns tied to the US subprime-mortgage market rose above US$1 trillion last week. The MSCI gauge has rallied 8.1 percent this month, on track for its first monthly gain since April, as governments from the US to Japan slashed interest rates and took more steps to bolster their economies.
Rio Tinto Group dropped 4.1 percent as UBS AG cut its earnings target and as the world’s third-largest mining company halted production at an iron plant. HSBC Holdings Plc declined 2.7 percent in Hong Kong after Standard & Poor’s (S&P) gave Europe’s largest bank a “negative” outlook. DBS Group Holdings Ltd, Southeast Asia’s largest bank, slumped 4.6 percent after announcing a S$4 billion (US$2.76 billion) rights offering.
“There’s still a lack of visibility regarding the timing of the economic recovery,” said Shane Oliver, head of investment strategy at AMP Capital Investors, which manages US$61 billion in Sydney. “The economy’s going to go through a very rough period. You can’t rule out further declines in the share market.”
The Nikkei 225 Stock Average gained 1.6 percent to 8,723.78, paced by Nomura Holdings Inc after Barron’s said profits from its Lehman Brother Holdings Inc assets may drive the stock higher. Most other markets fell in Asia except New Zealand, Malaysia and Vietnam.
Falling commodities demand prompted Rio Tinto to suspend operations at its Hismelt pig iron plant in Western Australia state.
Rio shares fell for a third day, falling 4.1 percent to A$37.90. UBS cut its forecast for the mining firm after analysts lowered their coking coal price estimates. Rio’s profit may be US$6 billion in the year ending Dec. 31 next year, 5.6 percent lower than previously estimated, the UBS report said.
BHP Billiton Ltd., the world’s largest mining company, fell 0.9 percent to A$29.64. UBS also lowered its profit estimate for the company by 7 percent to US$13.3 billion in the year ending June 30 next year.
Fortescue Metals Group Ltd plunged 21 percent to A$1.72 after Australia’s third-biggest iron-ore producer sold shares to pay a bill and raise cash.
A gauge of financial shares on MSCI’s benchmark Asian index dropped 0.6 percent. HSBC lost 2.1 percent to HK$74.95 after S&P said on Friday that impairments for the bank will probably stay “elevated” in the US and increase in the UK.