Asian Stocks Drop for First Time in Three Days

Asian stocks fell for the first time in three days, led by Samsung Electronics Co., after South Korea's President agreed to an independent probe of corruption allegations involving the country's biggest company.

HSBC Holdings Plc dropped from a one-week high in Hong Kong after Goldman, Sachs & Co. said Europe's biggest bank may have to write down $12 billion more for bad debts. Mitsubishi UFJ Financial Group Inc., Japan's biggest publicly traded lender, reversed earlier losses after Citigroup Inc. said it will raise $7.5 billion by selling a stake to an Abu Dhabi government fund.

There's not much hopeful talk in the market, said Eom Giyo, who helps manage the equivalent of $3.2 billion at Woori Credit Suisse Asset Management Co. in Seoul. Writedowns are increasing at financial institutions, and now we hear allegations of bad accounting at Samsung Group.

The MSCI Asia Pacific Index fell 0.9 percent to 157.02 as of 1:29 p.m. in Tokyo, trimming an earlier decline of as much as 2.1 percent. The benchmark rose 3 percent in the previous two sessions.

Japan's Nikkei 225 Stock Average slipped 0.6 percent to 15,044.96, after earlier sliding as much as 2.2 percent. Sony Corp. jumped after sales of its PlayStation 3 video-game console more than tripled last week as price cuts drew customers after the Thanksgiving holiday.

Benchmarks declined in other markets open for trading, except for New Zealand.

U.S. stocks fell yesterday, sending the Standard & Poor's 500 Index to its biggest drop in more than two weeks. Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, tumbled after UBS AG said higher credit costs will cause earnings growth to slow.

Source - Bloomberg

Asian Stocks May Drop for a Fourth Day on U.S. Spending Outlook

Asian stocks may fall for a fourth day after Lowe's Cos. cut its earnings forecast and an increasing number of economists said the U.S. may enter a recession, raising concern spending will slow in the world's biggest economy.

Financial companies including Kookmin Bank, South Korea's biggest, may decline after Goldman, Sachs & Co. recommended investors sell shares of Citigroup Inc.

Japanese exporters may also drop after the yen strengthened against the dollar. Companies dependent on the U.S. market for sales and profit such as Honda Motor Co. may fall.

U.S. stocks dropped to three-month lows yesterday with the Standard & Poor's 500 Index sliding 1.8 percent and the Dow Jones Industrial Average dropping 1.7 percent.

There's no escaping the negative impact from the tumbling U.S. market, said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo. If U.S. consumer spending starts to deteriorate, stocks here will be subject to another round of selling.

Australia's S&P/ASX 200 Index fell 1.8 percent to 6,415.90 as of 10:47 a.m. in Sydney.

Nikkei 225 Stock Average futures expiring in December fell 2 percent to 14,805 in Singapore, down from the close of 15,060 in Osaka and 15,040 in Singapore yesterday. The Bank of New York Asia ADR Index, which tracks the nation's American depositary receipts, slid 2.8 percent.

Citigroup Downgrade

U.S.-traded receipts of Kookmin Bank plunged 4.2 percent from the closing share price in Seoul yesterday. Those of Honda, which gets more than half of its revenue from North America, declined 2.7 percent. Receipts of Sumitomo Mitsui Financial Group Inc., Japan's third-biggest publicly traded lender, lost 3.3 percent.

Citigroup, the biggest U.S. bank, was lowered to sell by Goldman on the view that the lender's writedowns of collateralized debt obligations may total $15 billion over the next two quarters. That would be in addition to the $11 billion in writedowns already announced this month. Citigroup's shares plunged 5.9 percent to the lowest level since February 2003.

In Japan, Sumitomo Mitsui reported a 30 percent decline in first-half net income as the company took a charge of 32 billion yen ($292 million) on subprime mortgage investments. The bank also wrote down the value of a stake in OMC Card Inc. after that company lost almost half its market value in the two months after the acquisition.

U.S. Recession?

Lowe's, the second-largest U.S. home improvement retailer, slashed its full-year profit forecast for the second time in as many months because of the slumping housing market. Meanwhile, the number of economists forecasting the U.S. will slip into recession almost doubled over the last two months, a survey by the National Association for Business Economics showed.

U.S. consumers plan to spend less this year on holiday shopping, according to a survey by the Consumer Federation of America and the Credit Union National Association said today.

The yen strengthened to 109.74 versus the dollar, from 110.38 at the close of trading in Tokyo yesterday. Against the euro, Japan's currency recently traded at 160.99 from 162.01 yesterday. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted into local currency.

BHP Billiton Ltd., the world's largest mining company, slid 3.8 percent. Mitsui & Co., Japan's second-largest trading company, and Sumitomo Metal Mining Co., Japan's biggest nickel maker, may drop.

Copper futures plunged 5.4 percent in New York, the lowest closing price for a most-active contract since March 21. Gold, silver and crude oil prices also fell yesterday.

Olympus Corp., the world's biggest maker of endoscopes, may be active after the company agreed to buy Gyrus Group Plc for about 935 million pounds ($1.9 billion) in cash to expand its medical business.

Japan Tobacco Inc., the world's third-biggest maker of cigarettes, may climb. The company will make a bid for frozen- food processor Katokichi Co. and then sell a 49 percent stake in the company to Nissin Food Products Co., the Nikkei newspaper reported.

Source - Bloomberg

Japan May Suffer From U.S. Woes

Bank of Japan Deputy Governor Toshiro Muto said the U.S. housing recession and financial- market turmoil could hurt Japan's economy, making it difficult to decide when to raise interest rates.

The central bank expects the economy to keep growing with stable prices, though we must examine both upside and downside risks carefully, Muto, 64, said in an interview yesterday in Tokyo. This is quite a difficult situation.

Governor Toshihiko Fukui, who Muto is favored to replace in March, this week also said the U.S. housing slump and market gyrations could become worse than expected, threatening global growth. Credit Suisse Group, Goldman Sachs Group Inc. and UBS AG this month pushed back forecasts for the next rate increase from the first quarter of next year until at least the third quarter.

Muto said policy makers are fully aware that growth in Japan would be threatened should the U.S. slowdown spread to the rest of the world. The housing crisis and banks' reluctance to lend have yet to damp spending by U.S. consumers and companies, he added.

The central bank this week held the benchmark overnight lending rate at 0.5 percent, the lowest among major economies.

Muto said expectations that borrowing costs will stay low for a long time regardless of improvements in the economy could cause fluctuations in growth and prices and encourage inefficient investment.

Risky Investments

In the past month, Fukui has also said Japan's rates need to rise to deter companies and traders from making risky investments, even as barriers mount against an increase.

Export growth slowed in September as shipments to the U.S., Japan's biggest market, fell at the fastest pace in almost four years. At home, consumer prices have yet to rise this year and household spending is being curtailed by falling wages and a deteriorating job market.

Muto rebuked criticism that the central bank is eager to raise rates hastily.

Policy makers have never said such things, he said. We have repeatedly said we'll raise interest rates in accordance with improvements in the economy and prices; we don't have any predetermined schedule.

Japan has struggled to beat deflation that emerged after an asset-price bubble burst in the early 1990s and compelled the central bank to cut interest rates to near zero percent. The bank raised the key rate for the first time in almost six years in July 2006 and doubled it to 0.5 percent in February.

Third-Quarter Growth

Recent data, including gross domestic product figures that showed the economy rebounded in the third quarter, back the bank's outlook that the expansion will be sustained, Muto said.

Japan's economy grew an annualized 2.6 percent last quarter after contracting 1.6 percent in the previous three months, as exports and consumer spending countered a drop in housing investment, the government said this week.

Muto said the severe decline in housing will eventually be reversed. The drop was caused by the enforcement of stricter rules for obtaining building permits and pent-up demand will be met later, he said. Muto forecasts economic growth will average about 2 percent over the two years through March 2009.

Japan's housing starts tumbled 44 percent in September after the government introduced the rules in response to a 2005 scandal involving faked earthquake-engineering data.

Core consumer prices, which exclude fresh food, are highly likely to enter positive territory from the end of the year or toward the beginning of next year, even if only modestly, Muto said.

Source - Bloomberg

Japanese Stocks May Drop for an Eighth Day on Yen Strength

Japanese stocks may drop for an eighth day, led by exporters and lenders, after the yen strengthened and an analyst said E*Trade Financial Corp. may go bankrupt, pointing to increased subprime losses in the U.S.

Mazda Motor Corp., which exports 80 percent of its domestic production, and Sumitomo Mitsui Financial Group Inc., the nation's No. 3 publicly traded bank, may pace the drop.

Shares of E*Trade, a U.S. online brokerage, lost more than half their value yesterday after a Citigroup Inc. analyst said there is a 15 percent chance the company will seek protection from creditors because of investments in asset-backed securities. The yen climbed to the highest since May 2006 against the dollar.

Mitsubishi Corp. may drop after the price of oil slid 1.8 percent to the lowest close in a week, while copper and gold prices also tumbled.

Investors are not going to be able to escape the negative impact on sentiment from what is happening in the U.S., said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo. Just as some experts expect oil to keep rising, there is also the real possibility we may see oil prices fall to $60.

Nikkei 225 Stock Average futures expiring in December last traded in Chicago at 15,015, down from the close of 15,230 in Osaka and 15,165 in Singapore yesterday. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, slipped 0.2 percent.

Yen Strength

Yesterday, the Nikkei tumbled 2.5 percent to 15,197.09 and the Topix index dropped 2.5 percent to 1,456.40, the lowest in more than two years.

U.S.-traded receipts of Toyota Motor Corp., which gets as much as 70 percent of its operating profit from North America, lost 1.3 percent from the closing share price in Tokyo yesterday. Those of Sumitomo Mitsui slid 2.1 percent.

The yen recently strengthened to 109.50 against the dollar, from 110.34 at the close of market trading in Tokyo yesterday. Japan's currency rose to as high as 109.13, the strongest since May 2006. Against the euro, the yen advanced to as high as 158.71, a level not seen since Sept. 13. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted into local currency.

Prashant Bhatia, an analyst at Citigroup in New York, wrote in a report that there's a 15 percent chance E*Trade will seek protection from creditors after poor management put the viability of the franchise at risk. The company said last week it expects significant writedowns for losses on asset-backed securities.

E*Trade spokeswoman Pam Erickson described Bhatia's analysis as irresponsible and unfounded speculation.

Oil Tumbles

Mitsubishi Corp., Japan's largest trading company, generates the second-biggest proportion of its sales from selling crude and industrial fuel. Profits at Mitsui & Co., Japan's second-largest trading company, are the most sensitive to fluctuations in the price of oil.

Crude oil for December delivery fell 1.8 percent to $94.62 a barrel in the New York. The contract recently fell an additional 0.9 percent to $93.75 in after-hours trading. Copper futures fell 1.2 percent to a seven-month low, while gold plunged 3.2 percent, the biggest drop since Oct. 2006.

Tokyu Corp., an operator of railways, department stores and hotels, may advance. The company may say first half operating profit, or sales minus the cost of goods sold and administrative expenses, rose 12 percent to 42.5 billion yen ($388 million), the Nikkei newspaper reported. That would exceed the company's current forecast by 1 billion yen.

Isuzu Motors Ltd., Japan's third-biggest maker of commercial vehicles, may slip after the company reported a 26 percent drop in second-quarter operating profit as domestic sales slumped.

Source - Bloomberg