Asian Stocks Drop as Rio Takeover Derailed; Toyota Declines

Nov. 26 (Bloomberg) — Asian stocks fell as credit market turmoil derailed BHP Billiton Ltd.‘s $66 billion takeover of Rio Tinto Group and Toyota Motor Corp. lost its AAA debt rating from Fitch Ratings.

Rio Tinto, the world’s third-largest mining company, slumped 33 percent, the most in more than two decades, while BHP advanced. Toyota declined 4.5 percent after Fitch cut the world’s second- largest automaker’s debt to AA and said the outlook remains negative. China Eastern Airlines Corp. slid 5.9 percent after the Shanghai Securities News said the airline incurred $690 million of losses from wrong-way bets on fuel.

The MSCI Asia Pacific Index lost 0.4 percent to 79.69 as of 11:06 a.m. in Tokyo. That snapped yesterday’s 4.1 percent rally, the biggest in three weeks, fueled by a surge in commodity prices and the U.S. government’s rescue of Citigroup Inc.

“Investor sentiment is drifting between optimism about U.S. policies and pessimism about the market outlook,” Hiroichi Nishi, a Tokyo-based equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television.

Japan’s Nikkei 225 Stock Average dropped 1.5 percent to 8,200.34. Panasonic Corp. slid 3.4 percent after the Nikkei newspaper said Goldman Sachs Group Inc. opposed the company’s bid for Sanyo Electric Co.

Rio led declines in Australia. Hana Financial Group Inc. paced gains in South Korea after the nation’s financial regulator said banks aren’t in need of public funds.

U.S. stocks advanced for a third day yesterday. The Standard & Poor’s 500 Index swung between gains and losses more than 20 times before closing 0.7 percent higher. Futures on the index lost 0.4 percent in trading today.

Takeover Bid Ended

More than half of stocks in Asia have sunk below their book value as the collapse of the U.S. housing market curbed consumer spending on Asian-made goods and reduced demand for fuel and other commodities. MSCI’s Asian index has tumbled by 50 percent this year as the global economy slipped into recession.

Rio plunged 33 percent to A$43, the steepest decline since October, 1987. BHP, the world’s largest mining company, climbed 7.7 percent to A$28.24.

BHP yesterday scrapped its takeover offer for Rio saying the move would have increased the company’s debt load and as seizure in credit markets and a global recession has led to slumping commodity prices.

South Korea’s Posco, Asia’s third-largest steelmaker, rose 2.2 percent to 325,000 won. The merger would have raised iron ore prices, the steelmaker had said.

Toyota slumped 4.5 percent to 2,990 yen. Fitch lowered its rating on the company and added that the weak auto market could trigger additional downgrades. The company has slashed production and sales forecasts in recent months to cope with a global recession that has eroded demand for expensive items such as cars.

OECD Forecast

The Organization for Economic Cooperation and Development cut its 2009 growth forecast for its 30 members yesterday to a 0.4 percent contraction, from a previous estimate of 0.3 percent, and called on governments to use fiscal and monetary policy to ease the worst recession since the early 1980s.

The collapse of the U.S. mortgage market has claimed Bear Stearns Cos and Lehman Brothers Holdings Inc. while costing global financial companies almost $1 trillion on credit losses and writedowns. The S&P/Case-Shiller home-price index tumbled 17.4 percent in September from a year earlier, the fastest pace on record, as rising foreclosures in the U.S. pushed down property values.

China Eastern lost 5.9 percent to 3.70 yuan in Shanghai. The nation’s third-largest carrier incurred $690 million in losses on hedging contracts as of Nov. 14 because of wrong-way bets on fuel prices, the Shanghai Securities News reported.

Panasonic, the world’s largest maker of consumer electronics, fell 3.7 percent to 1,346 yen. Sanyo lost 1.3 percent to 154 yen. Goldman won’t accept Panasonic’s 120 yen per share takeover bid for Sanyo because the price is too low, the Nikkei reported, without saying where it obtained the information. Goldman controls a majority stake in Sanyo along with two other investor groups.

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