Asian stocks plunge as profit declines

Asian stocks tumbled after Samsung Electronics Co's profit fell, Sony Corp slashed its earnings forecast and Toyota Motor Corp sales dropped for the first time in seven years.

South Korea's Kospi index plunged 11 per cent, its biggest decline since September 2001, as Samsung sank 14 per cent. Sony slumped 14 per cent and Toyota lost more than 5 per cent, sending Japan's Nikkei 225 Stock Average close to the lowest level since 1982. HSBC Holdings Plc tumbled 13 per cent after Morgan Stanley cut its share-price target. The yen jumped to a 13-year high and Treasuries rose.

“Financial markets have crashed and are out of control,” said Yuji Ogino, an executive director at Meiji Dresdner Asset Management Co, which manages the equivalent of $28 billion in Tokyo. “This crash is different from anything I've experienced since getting into this business in the late 1980s and it's hard to find ways to ride out the situation.” The MSCI Asia Pacific Index fell 5.1 per cent to 80.99 as of 7.17 pm in Tokyo, capping its seventh weekly decline in the past eight weeks. More than 900 stocks slid on the 990-member index and seven of the 10 industry groups lost 4 per cent or more.

 

MSCI's Asian index dropped 7.5 per cent this week and has plunged 49 per cent this year, its worst annual performance since the measure was created in 1980. The turmoil wiped out more than $10 trillion of global stock-market value this month.

Price Cut: The Nikkei 225 dropped 9.6 per cent to 7,649.08, some 40 points away from its lowest level since 1982. The Kospi capped its worst week since at least 1987, losing 20 per cent, as South Korea's economy grew at the slowest pace in four years.

Stock declines have dragged valuations on MSCI's Asian index to 1.1 times book value, cheaper than those in the US and Europe. The S&P trades at 1.8 times book value and the Dow Jones Stoxx 600 Index at 1.2 times. Asia's stocks traded as high as 2.6 times book in May 2007, when US stocks were at 2.9 times and Europe was at 2.6 times.

‘Off a Cliff’: Samsung, Asia's biggest maker of chips, flat screens and mobile phones, dropped 14 per cent to 407,500 won in Seoul, its biggest decline since 1995. Third-quarter net income fell 44 per cent, as a glut drove down prices of memory and displays. LG Electronics Inc, South Korea's second-largest electronics maker, slid 15 per cent to 70,600 won.

“Slowing US and European growth have sent shockwaves through the economies of the developing world,” said Hiroshi Fujimoto, a fund manager at Shinkin Asset Management Co in Tokyo, which manages the equivalent of $5.7 billion. “Exporters are likely to see their sales drop off a cliff.”

Sony, the world's second-largest maker of consumer electronics, retreated 14 per cent to 1,972 yen in Tokyo. Net income will drop 59 per cent from a year earlier in the 12 months to March 31, Sony said on Thursday, citing the stronger yen and worsening economic outlook.

The yen climbed to the highest since August 1995 against the dollar as the risk of a global recession prompted investors to slash carry trades, in which they fund purchases of higher- yielding assets with Japanese currency. The yen gained 3.2 per cent to 94.19 against the dollar at 5:35 pm on Friday, set for its highest level since August 1995. Against the euro, it rose 5.9 per cent to 118.51.

Sony's Shadow: Panasonic Corp, the world's biggest consumer-electronics maker, fell 12 per cent to ¥1,346 in Tokyo, the most since October 1987. Sharp Corp, Japan's largest maker of mobile phones and liquid-crystal displays, plummeted 14 per cent to ¥631, the lowest level since April 1982.

“Sony's announcement casts a shadow on all electronics shares,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd, said in an interview with Bloomberg Television.

Toyota Motor Corp, the world's second-largest automaker, fell 6.4 per cent to ¥3,200. The company said quarterly sales dropped 4.3 per cent, the first decline in seven years, as the financial crisis crippled worldwide auto demand.

Lotte Shopping Co, South Korea's biggest department-store operator, lost a record 13 per cent to 133,000 won, capping an eight-day, 40 per cent plunge, after net income missed estimates.

Slowing Growth: South Korea's economy grew 0.6 per cent in the last quarter from the previous three months, the weakest pace in four years, the central bank said. The data sparked concern a recession is looming in Asia's fourth-largest economy as consumers cut spending and the global slowdown damps export demand.

HSBC, the world's second-biggest bank by value, tumbled 12 per cent to HK$88, the worst loss since October 1997, after Morgan Stanley cut its share-price estimate by 25 per cent to HK$75.

A decline in shipping rates sent China Cosco Holdings Co, the world's biggest operator of dry-bulk ships, down 15 per cent to HK$3.40 in Hong Kong. STX Pan Ocean Co, South Korea's biggest, fell 19 per cent to 69 cents in Singapore.

Freight, Air Traffic: The Baltic Dry Index, a measure of commodity-shipping rates, declined 5.9 per cent on Thursday in London, the lowest since September 11, 2002. The gauge has plunged 62 per cent since October 3, the last time it rose. Goldman, Sachs & Co slashed its price estimate for China Cosco by 73 per cent to HK$4.30 in a report.

Air China Ltd., the nation's second-biggest carrier, sank 17 per cent to HK$1.81, a record low. Cathay Pacific Airways Ltd, the largest in Hong Kong, lost 10 per cent to HK$8.78.

Also in Hong Kong, Jiangxi Copper Co, China's second- biggest smelter of the metal, lost 11 per cent to HK$3.40. The company said last night the global financial turmoil has hurt sales and raw material purchases, and it may miss production targets.