Asian Stocks Fall Most in 3 Weeks on Growth Concern

Asian stocks declined, sending a regional benchmark to its biggest loss in three weeks, after the Federal Reserve said U.S. economic growth is slowing and Morgan Stanley said Japan may enter a recession.

Mitsubishi UFJ Financial Group Inc. led banks lower on speculation that a quarter-point interest-rate cut by the Fed yesterday won't be enough to halt credit-market losses. Samsung Electronics Co. and BHP Billiton Ltd. retreated on concern demand for electronics and raw materials will slump in Asia's largest export market.

Market sentiment has been shaken, said Yang Haeman, who manages the equivalent of almost $1 billion at NH-CA Asset Management in Seoul. A U.S. slowdown is already quite certain and investors now are also worried that this will result in a global slowdown.

The MSCI Asia Pacific Index fell 1.5 percent to 162.81 as of 11:17 a.m. in Tokyo, set for its largest drop since Nov. 21. Almost seven stocks fell for each that gained among the benchmark's 1,140 members.

Japan's Nikkei 225 Stock Average lost 1.8 percent to 15,749.87 after climbing yesterday to the highest since Nov. 7. Canon Inc. also slipped after the yen strengthened against the dollar, reducing the value of exporters' overseas sales. Benchmarks declined in all markets open for trading.

U.S. stocks tumbled the most in a month yesterday, sending the Standard & Poor's 500 Index and Dow Jones Industrial Average lower by more than 2 percent.

Increased Uncertainty

Mitsubishi UFJ, which had more than $2 billion in subprime- related investments at the end of September, lost 1.8 percent to 1,206 yen. Japan's biggest publicly traded bank also declined after the Asahi newspaper reported it has been asked to invest in a U.S. bailout fund for financial institutions with subprime loan exposure.

Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation, the Federal Open Market Committee said after yesterday's meeting, when the benchmark interest rate was cut to 4.25 percent.

Mizuho Financial Group Inc., Japan's second-biggest publicly traded bank, dropped 2.8 percent to 617,000 yen. Commonwealth Bank of Australia, the nation's second-biggest lender, slipped 1.1 percent to A$60.11

Samsung, South Korea's largest exporter, slid 1.5 percent to 594,000 won. Westfield Group, the owner of 59 shopping malls in the U.S., dropped 1.7 percent to A$21.57 and James Hardie Industries NV, the biggest seller of home siding in the U.S., lost 2.1 percent to A$6.47.

Slowdown in U.S., Japan

The U.S. economy will expand at an annual pace of 1 percent in the fourth quarter, down from 4.9 percent in the previous three months, according to the median estimate in a Bloomberg News survey of economists.

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending, the FOMC said in its statement.

Meanwhile, Morgan Stanley's chief Japan economist Takehiro Sato slashed his 2008 growth estimate to 0.9 percent from 1.9 percent a month ago, saying the Japanese economy is headed for a mild recession that could worsen should a bigger-than- expected U.S. slowdown damp demand for exports.

Canon, the world's largest maker of digital cameras, slid 2.9 percent to 5,660 yen. Honda Motor Co., Japan's second-biggest automaker, fell 2.8 percent to 3,780 yen.

Yen, Commodities

The yen strengthened to as high as 110.63 versus the dollar from 111.81 at the close of trading in Tokyo yesterday. A stronger yen decreases the value of exporters' dollar-denominated sales when converted into local currency.

Elsewhere, shares of BHP, the world's largest mining company and Australia's biggest oil producer, fell 2 percent to A$43.30. Rio Tinto Group, the world's No. 3 mining company, dropped 2.3 percent to A$143.10.

Crude oil declined as much as 0.8 percent to $89.30 a barrel on the New York Mercantile Exchange and was recently at $89.52. Copper slid as much as 1.9 percent in New York.

We turned bearish on commodities, said Leslie Phang, who helps manage $1 billion at Commonwealth Private Bank in Singapore. Demand from China won't be enough to offset a slowdown in the U.S., Japan and Europe.

Source - Bloomberg