Asian Stocks May Drop on Concern U.S. Subprime Loss Will Spread

By Patrick Rial


Nov. 27 (Bloomberg) -- Asian stocks may fall on concern losses from U.S. subprime mortgage-related securities at financial institutions will increase. Mitsubishi UFJ Financial Group Inc., Japan's second-largest bank, may lead declines.

HSBC Holdings Plc, Europe's biggest bank by market value, may have to write down an additional $12 billion for non- performing subprime assets, Goldman, Sachs & Co. said. CNBC reported Citigroup Inc. may shed 45,000 jobs, citing unidentified people within the company. In the U.S., the Standard & Poor's 500 Index fell 2.3 percent, the biggest drop in more than two weeks.

``With the U.S. performing so poorly, it can only mean bad news for the market here,'' said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo.

Japanese exporters such as Sony Corp. may drop after the yen strengthened to the highest since June 2005 against the dollar, reducing the value of their overseas sales.

Australia's S&P/ASX 200 Index fell 1.6 percent to 6,370.70 as of 10:41 a.m. in Sydney. New Zealand's NZX 50 Index, Asia's first benchmark to begin trading, lost 0.4 percent to 4,061.38 in Wellington.

U.S.-traded receipts of Mitsubishi UFJ slid 4.1 percent from the closing share price in Tokyo yesterday. Those of Sony declined 2.3 percent. Receipts of Kookmin Bank, South Korea's largest lender, dropped 4.1 percent.

HSBC may have to set aside additional funds for bad debts because of customer defaults at its U.S. subprime lender Household International Inc., Goldman said. The brokerage lowered its rating on the stock to ``sell'' from ``neutral.''

Stronger Yen

The London-based bank said yesterday it will also bail out its two structured investment vehicles by taking on $45 billion of their assets to avoid a fire sale.

Citigroup, which earlier this month announced at least $8 billion of fourth-quarter writedowns on mortgage investments, said it is reviewing ways to cut costs. The bank declined to comment on specifics. Citigroup may cut as many as 45,000 jobs in the next two months, CNBC reported yesterday, citing unidentified people within the company.

The yen's gain against the dollar may also push shares lower as it reduces the value of overseas sales when converted into local currency. The yen strengthened to as high as 107.23 to the dollar in New York, the highest since June 2005.

Japanese paper companies such as Japan Pulp & Paper Co. may rise after the Nikkei newspaper said the producers are expanding their operations in China to take advantage of growing demand.

Nikkei 225 Stock Average futures expiring in December recently fell 2.3 percent to 14,835 in Singapore, down from 15,210 in Osaka, Japan, and 15,200 in Singapore yesterday. The Bank of New York Asia ADR Index, which tracks the region's American depositary receipts, slipped 0.8 percent.