Asian stocks fall on recession fears

Asian stocks plummeted, driving the MSCI Asia Pacific Index down the most on record, on concern that the global economy would sink into a recession and after Standard & Poor’s said South Korean banks may fail to refinance debt.

MSCI’s Asian index, which comprises the biggest stocks across the region from Australia to Japan, tumbled 8.5 per cent to 87.04 at 7:18 pm in Tokyo, the largest drop since the measure was compiled in December 1987.

Japan’s Nikkei 225 Stock Average plunged 11 per cent, the steepest loss since the crash of 1987. South Korea’s Kospi Index fell 9.4 per cent, the most since the 2001 terror attacks, and the won retreated as much as 12 per cent.

Falling metal and oil prices dragged BHP Billiton down 13 per cent and Cnooc 8.9 per cent. While MSCI’s Asian index is still up 1.2 per cent this week after central bankers around the world announced a $2 trillion global bank rescue, the gauge has lost 45 per cent this year as credit markets seized up and economies slowed.

“We’re having a U-turn in perception,’’ said Mark Konyn, chief executive officer of RCM Asia Pacific, which oversees $15 billion in Asian assets. “While remedial measures taken globally have been sufficient to arrest the financial crisis, concerns have quickly shifted to the economy. A synchronized global slowdown threatens a longer and deeper recession.’’

Standard & Poor’s 500 Index futures gained 0.8 per cent, erasing earlier losses after UBS AG said it will raise more than $5 billion from the Swiss government. The S&P tumbled 9.1 per cent yesterday, the biggest loss since 1987, after US retail sales fell twice as much as economists estimated.

Concern that US consumers would buy fewer products from Asia drove Sony, the maker of the PlayStation 3 game console, and Sharp down more than 10 per cent. Hong Kong’s Hang Seng Index declined 4.8 per cent, paring an earlier drop of 8.9 per cent, after Air China forecast a loss.

Asian benchmark indexes are trading near lows reached last week, when MSCI’s Asian gauge fell the most ever on concern the global credit crisis will increase company failures.

Markets rebounded earlier this week after the US Treasury said it would invest $250 billion in financial institutions and France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders.

Japan’s Prime Minister Taro Aso said today the US bank rescue plan is “insufficient’’ and “that’s why markets are falling.’’ Aso was speaking to lawmakers in parliament.

The Nikkei’s drop today is the third time the measure has lost more than 9 per cent in six trading sessions, and follows a 14 per cent jump on October 14.

The Kospi tumbled to its lowest close since June 2006, as S&P said it may cut credit ratings for Kookmin Bank, Woori Bank and five other financial companies. The cost of protecting South Korean debt from default rose.

The won, Asia’s worst-performing currency this year, fell 9.7 per cent to 1,373 per dollar at the 3 pm stock trading close, Seoul Money Brokerage Services said.