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Asian benchmark index slumps to 5-year low, extend global rout

Bloomberg  |  Mumbai 

Asian stocks fell, driving the region’s benchmark index to its lowest level since August 2003, as Japan’s exports declined the most in almost seven years and US consumer prices sank by a record.

lost over 6 per cent on concern demand is slumping in North America, where the companies get at least a quarter of their sales. Japanese insurers tumbled the most since 1987, led by T&D Holdings Inc., after they slashed profit forecasts as the value of securities investments dropped. Rio Tinto Group plunged 13 percent as a bleaker global economic outlook triggered a decline in commodities prices.

“It’s the end of the world as we know it,” said Raymond Tang, who oversees $5.8 billion as chief investment officer at CIMB-Principal Asset Management Bhd., a unit of Malaysia’s second-biggest bank. The economic slump is “the worst I’ve seen on a global scale,” he said.

The MSCI Asia Pacific Index slumped 5.1 per cent to 75.16 at 7:10 pm in Tokyo, extending this week’s decline to 9.5 percent. Twelve stocks dropped for each that rose on the measure.

Futures on the US Stan-dard & Poor’s 500 Index retreated 1.7 per cent. The S&P 500 tumbled 6.1 percent yesterday, as Citigroup Inc. announced a plan to buy troubled investment-fund assets and concern grew over the survival of the nation’s car industry.

Europe’s Dow Jones Stoxx 600 Index slipped 4 per cent. Both benchmark gauges closed at the lowest levels since 2003.

MSCI’s Asian index erased a 25 percent rally it posted since October 27, when it last closed at a five-year low, as recessions in Japan and Hong Kong and lower profit forecasts wiped out optimism sparked by global interest rate cuts and Barack Obama’s presidential victory in the US.

  Nov 20, 2008 Net chg* % chg*
Nikkei 225 7,703.04  -570.18


Kospi 948.69 -68.13 -6.70
Taiwan Taiex 4,089.93 -194.16 -4.53
Hang Seng 12,298.56 -517.24 -4.04
Sensex 8,451.01 -322.77 -3.68
SET 393.85 -14.66 -3.59
Straits Times 1,613.95 -51.64 -3.10
Jakarta Composite 1,154.97 -25.39 -2.15
Shanghai Composite 1,983.76 -33.71 -1.67
* over previous close

US consumer prices plunged 1 percent last month, the most since records began in 1947, raising the risk of deflation, while housing starts tumbled to a record low. Federal Reserve policy makers last month predicted the U.S. economy will contract through the middle of 2009, with some prepared to cut interest rates further in response, records released yesterday show.

“US consumers have overextended themselves and the consequence of their retrenching is that there’s not going to be any growth for the next five years,” said Takashi Kamiya, who helps oversee some $16 billion as chief economist at T&D Asset Management Co. in Tokyo. “There’s nothing to be positive about.”

Japan’s Nikkei 225 Stock Average lost 6.9 percent to 7,703.04. Isuzu Motors Ltd. and Mazda Motor Corp. dropped after saying they will slash at least 2,700 temporary jobs in Japan as the companies reduce output on falling demand.

South Korea’s Kospi index slid 6.7 per cent, completing its first eight-day losing streak since March 2003, as investors drained funds from emerging KB Financial Group Inc. led declines, while the won slumped to a decade-low.

Nintendo, the world’s biggest maker of handheld video-game consoles, declined 7.9 per cent to 27,010 yen in Osaka. Sony slumped 6.4 per cent to 1,826 yen.

Exports, which drove Japan’s growth in the past six years, fell 7.7 per cent from a year earlier, the Finance Ministry said. The nation’s corporate-bond risk rose to a record after the report, according to the Markit iTraxx Japan index.

MSCI’s Asian index has plunged 52 per cent in 2008 as global financial companies’ losses and writedowns from the collapse of the US sub-prime mortgage market mounted, eventually toppling Lehman Brothers Holdings Inc. and arresting global expansion. The Asia-Pacific region may grow in 2009 at less than half the pace of the previous two years, the Pacific Economic Cooperation Council said On Thursday.

Shares on the index trade at 9.3 times trailing earnings, compared with 19.5 times in November last year, when the measure hit a peak of 172.32, data shows.

“Fear has well and truly taken over from greed,” said Rob Patterson, who manages about $2 billion at Argo Investments Ltd. in Adelaide. “We’re seeing undisciplined selling. There’s definitely an element of irrationality to all this.’’

The decline in stocks forced Japanese insurers to reduce their full-year earnings forecasts, sending the nine-member Topix Insurance Index down 15 per cent, the worst performance of 33 industry groups.

T&D Holdings Inc., Japan’s biggest publicly-traded life insurer, tumbled 14 per cent to 2,970 yen. T&D lowered its target by 95 percent. Tokio Marine Holdings Inc., the largest casualty insurer, plunged 15 per cent to 2,220 yen after cutting its forecast 72 per cent.

Both stocks fell by the most on record.

First Published: Fri, November 21 2008. 00:00 IST