Asian Stocks Have Biggest Drop in Two Months, Led by Financials

By Chua Kong Ho

Oct. 20 (Bloomberg) -- Asian stocks had their biggest weekly drop in two months, led by financial companies, on concern losses from the worst U.S. housing slump since 1991 will spread.

Mitsubishi UFJ Financial Group Inc. and Westpac Banking Corp. declined after Citigroup Inc. and other U.S. lenders posted lower profits due to housing-loan writedowns and trading losses. Nomura Holdings Inc., Japan's biggest securities company, fell to a three-week low after saying it will report its first quarterly loss in more than four years.

Japan's Nikkei 225 Stock Average had its steepest slide in two months. India's Sensitive Index had its first weekly drop since August, leading declines among Asia's benchmarks, on concern proposed overseas investment rules will curb capital inflows.

``There's probably going to be more bad news before we start to hear good news,'' said Adrian Lim, who helps manage about $50 billion at Aberdeen Asset Management Asia Ltd. in Singapore. ``Some of the banks in Asia that have strayed from their core business and invested in U.S. home loan-related instruments could be affected.''

The Morgan Stanley Capital International Asia-Pacific Index fell 1.4 percent to 165.77 this week, its first decline since the five days ended Sept. 14. A measure of financial shares in the index slid 3.6 percent, the biggest loser among the 10 industry groups.

Benchmarks in Australia, China, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam fell. The Hang Seng Index in Hong Kong surpassed 30,000 for the first time. Measures in Indonesia, New Zealand, Pakistan, Sri Lanka and Taiwan rose.

Banks, Nomura

Mitsubishi UFJ, Japan's largest publicly traded bank, tumbled 12 percent to 1,027 yen, its worst week since Oct. 24, 2003, and the week's single biggest contributor to the MSCI Asia-Pacific index's decline.

Westpac Banking, Australia's fourth-biggest lender, fell 3.2 percent to A$28.70. Kookmin Bank, the largest in South Korea, fell 7.6 percent to 73,000 won, extending the previous week's 5.1 percent slide.

Citigroup, the largest U.S. bank, warned that subprime mortgages will continue to plague financial markets and late payments on home loans may increase in the fourth quarter. Bank of America Corp., the No. 2 lender, set aside $2.03 billion in the quarter to cover bad loans amid the worst U.S. housing slump in 16 years.

Posco Drops

Nomura dropped 7 percent to 1,944 yen, the lowest since Oct. 1. The company said on Oct. 15 it will post its first quarterly pretax loss in more than four years because of losses on U.S. mortgage-backed securities.

``Nomura's announcement of additional losses due to subprime securities shows this is not just limited to the U.S.,'' said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo.

Posco, Asia's biggest steelmaker by market value, retreated 11 percent to 604,000 won in Seoul, its biggest weekly drop since April 2003. The South Korean company unexpectedly reported a decline in third-quarter profit on higher costs of iron ore.

PetroChina Co. surged in Hong Kong, propelling it past General Electric Co. as the world's second-most valuable company. China's largest oil and gas producer rose 14 percent to HK$18.92 after its parent said the company will increase output at its Changqing oilfield by 46 percent by 2009. PetroChina has a stock market value equivalent to $437 billion, behind only Texas-based Exxon Mobil Corp.

In India, the Bombay Stock Exchange Sensitive Index fell as much as 9.2 percent on Oct. 17, triggering a trading halt, before paring its losses. The measure ended the week with a 4.7 percent decline.

India, China Fall

The Securities & Exchange Board of India said late Oct. 16 that foreign institutional investors should be barred from issuing or renewing offshore derivative instruments linked to the futures and options markets.

ACC Ltd., India's biggest cement maker, Reliance Energy Ltd., the country's No. 2 utility by market value, and Bharat Heavy Electricals Ltd., the nation's largest maker of power equipment, led this week's drop by the Sensex.

China's benchmark CSI 300 index fell the most in five weeks on Oct. 18 on speculation the securities regulator will adopt a plan that may narrow the price gap between shares traded simultaneously in Shanghai and Hong Kong. The index ended the week 2.2 percent lower.