Fears of global slowdown send Asian stocks reeling

GROWTH FEARS: Quickly rising commodity prices are fueling inflationary fears as global markets try to cope with more than US$8 trillion in losses so far this year


Tue, Jun 24, 2008 - Page 11

Asian stocks slumped to the lowest level in almost three months after a rebound in oil prices, while renewed predictions of asset writedowns rekindled concern global economic growth will slow.

Bridgestone Corp, the world’s largest tiremaker by sales, dropped for a third day. Samsung Fire & Marine Insurance Co led financials lower as Citigroup Inc prepared to cut jobs and UBS AG forecast the US bank will write down more assets. Toyota Motor Corp tumbled to the lowest in a month as the dollar weakened and the US auto market showed further signs of deteriorating.

“People’s fears about inflation are materializing as commodity prices rise,” said Yang Jeung-won, chief investment officer in Seoul at Samsung Investment Trust Management Co, which oversees the equivalent of US$7.8 billion in equities. “Financials are going to teeter on shaky ground for a while to come.”

The MSCI Asia Pacific Index lost 0.8 percent to 139 as of 3:34pm in Tokyo, headed for the lowest since April 1. Japan’s Nikkei 225 Stock Average fell 0.6 percent to 13,857.47. Indexes declined throughout the region, except in Vietnam, New Zealand and Sri Lanka.

Fortescue Metals Group Ltd led commodities producers higher after Australia’s government lifted its estimate for exports of raw materials, driven by demand from China.

More than US$8 trillion in global stock market value has been wiped out this year as a 42 percent jump in oil raises costs for consumers and businesses. Higher commodity prices are also hampering central bank efforts to keep interest rates low. Shares in the Philippines dropped to a 20-month low after the central bank said it might have to tighten monetary policy to curb inflation.

More than US$398 billion in asset writedowns and credit losses stem from the collapse of the US subprime-mortgage market, data compiled by Bloomberg shows.

Benchmarks in the US and Europe fell to the lowest in three months on Friday, dragged down by the gain in oil and after analysts predicted banks will post more credit-market losses. Futures for the Standard & Poor’s 500 Index rose 0.4 percent yesterday.

Samsung Fire & Marine, South Korea’s biggest non-life insurer by market value, dropped 2.7 percent.

Citigroup may add US$8.7 billion in asset writedowns this quarter to the US$42 billion it has already announced, UBS AG said.

Elsewhere, Lehman Brothers Holdings Inc predicted UBS and Deutsche Bank AG could produce a total of US$8.5 billion in asset write-offs for the second quarter.

“The resurgence of risks related to the credit crunch is the most important factor in the market,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co, said in an interview with Bloomberg Television.

China Petroleum & Chemical Corp (中石化) tumbled 7.6 percent, its steepest drop since March 27. China’s largest refiner is hampered by higher oil prices as the government controls how much it can charge for fuel.

Sales of commodities may rise to a record A$212 billion (US$203 billion) in the year ending June 30 next year, the Australian Bureau of Agricultural and Resource Economics has said.