Asian Stocks Fall, Extending Global Rout, on Economy Concern

Oct. 7 (Bloomberg) — Asian stocks slumped, extending a global rout, as surging credit costs and slowing demand for the region’s exports threatened to tip economies into recession.

Toyota Motor Corp. slumped 5.9 percent, yielding its spot as the world’s largest automaker by value to Volkswagen AG, as the yen traded close to a three-year high versus the euro. Komatsu Ltd., the world’s second-biggest construction machinery maker, slid 3.3 percent on concern orders will fall. Australia’s benchmark index rallied from an earlier loss after the central bank cut interest rates by the most since 1992.

“I’m shocked by the speed at which the global economy has deteriorated,” said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management, which oversees about $20 billion. “The last bullet that central banks have is to lower interest rates. If that does not work, I really don’t know what will happen.”

The MSCI Asia Pacific Index fell 1.1 percent to 99.29 as of 12:49 p.m. in Tokyo, with industrial shares and companies dependent on consumer spending contributing the most to the decline. The drop extended a rout that wiped more than $2 trillion from global markets yesterday, sending the Dow Jones Industrial Average to its first close below 10,000 since 2004.

MSCI’s Asia Pacific index tumbled 22 percent in the third quarter as the credit crisis forced Lehman Brothers Holdings Inc. to file for bankruptcy and governments to seize Fannie Mae, Freddie Mac and the U.K.’s Bradford & Bingley Plc.

Japan’s Nikkei 225 Stock Average lost 1.9 percent to 10,275.83, having earlier dipped below 10,000 for the first time since December 2003. Mitsubishi Corp., which generates more than half its profit from trading commodities, declined 4.2 percent after metals tumbled.

Cash Scarcity

Most stock markets in the region fell. Hong Kong is closed for a holiday. In Thailand, the SET Index sank 2.2 percent after police fired tear gas to disperse protestors at the parliament building.

Japan and Australia’s central banks today pumped more than $11 billion into the financial system to ease record-high money- market rates.

The London interbank offered rate, or Libor, that banks charge each other for three-month dollar stayed near a nine- month high, the British Bankers’ Association said. The Japanese Libor-OIS spread, a gauge of cash scarcity among banks, rose to a record.

“Investors couldn’t imagine the global economy would fall apart as it has,” said Nobuyuki Kashihara, who helps oversee $26 billion at Mizuho Asset Management Co. in Tokyo. “The feedback effect between the financial world and real economy is pushing us into uncharted waters.”

`Fall Apart’

Toyota dropped 5.9 percent to 3,670 yen on concern the stronger yen will lower the value of overseas sales when expressed in the local currency. The company makes almost 80 percent of its sales outside Japan.

The yen strengthened against the euro on speculation the deepening credit crisis will encourage investors to sell higher- yielding assets and pay back low-cost loans in Japan. The yen rose to 137.69 per euro from 137.50 yesterday, when it touched 135.05, the strongest since September 2005. Japan’s currency was at 101.75 per dollar from 101.82.

Sharp tumbled 9.2 percent to 911 yen, the most since March 2000, after the company said profit will probably drop 41 percent to 60 billion yen ($591 million) for the year ending March 31, less than the previous forecast of 105 billion yen.

Komatsu declined 3.3 percent to 1,211 yen, extending a three-day, 26 percent slide. Fanuc Ltd., the largest industrial- robot maker, fell 2.7 percent to 6,970 yen. Overseas sales account for about two-thirds of sales at both companies.

Economic Growth

The International Monetary Fund will cut its global economic-growth forecast “pretty significantly” this month as the financial crisis throttles lending, Managing Director Dominique Strauss-Kahn said Oct. 4. The IMF is due to release updated forecasts next week. In July, it estimated global growth of 4.1 percent for 2008 and 3.9 percent in 2009.

Mitsubishi declined 4.2 percent to 1,750 yen. Mitsui & Co., the second-biggest Japanese trading company, slid 2 percent to 1,092 yen. A measure of six metals traded on the London Metal Exchange slumped 5.8 percent yesterday, the most since Aug. 16, 2007. Copper fell 7.5 percent and nickel 5.6 percent.

Mitsui Mining & Smelter Co., the co-owner of Japan’s biggest copper smelter, dropped 2.4 percent to 2,026 yen after slashing a planned dividend and forecasting a second year of profit declines.

Aluminum Corp. of China Ltd., the country’s largest producer of the metal, fell 4.8 percent to 8.20 yuan in Shanghai. Third-quarter profit will slump by more than half due to higher raw-material costs and slowing demand, the company said.

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