Talal Abu-Ghazaleh Capital Services (TAG Capital) | Asian Stocks Fall on Earnings Concerns; News Corp., Isuzu Drop

Asian Stocks Fall on Earnings Concerns; News Corp., Isuzu Drop

06 Nov 2008

Nov. 6 (Bloomberg) -- Asian stocks declined, snapping a three-day gain, after profit forecasts by News Corp., Cathay Pacific Airways Ltd. and Isuzu Motors Ltd. added to evidence the global economy is headed toward a recession. News Corp. slumped 21 percent, the most since 1987, after saying net income will fall and Cathay Pacific Airways Ltd. sank 13 percent after predicting ``disappointing'' results. Isuzu dropped 21 percent after Japan's largest maker of light-duty trucks said a stronger yen will hurt earnings. Panasonic Corp. and Hyundai Motor Co. lost more than 8 percent following a report that showed U.S. employers cut the most workers in six years, raising concern demand will slow for televisions and cars. ``Weak earnings strengthen the consensus that the world is going into a recession,'' said Seiichiro Iwamoto, who oversees about $10 billion at Mizuho Asset Management Co. in Tokyo, and is buying shares of companies that don't rely on overseas sales. ``Electronics components and automobiles are among the industries investors should be worried about.'' The MSCI Asia Pacific Index slid 6 percent to 88.74 as of 3:52 p.m. in Tokyo, surrendering more than half the ground gained in the previous three days. Japan's Nikkei 225 Stock Average dropped 6.5 percent to 8,899.14, snapping its best six-day winning streak on record. Shares fell in all markets open for trading apart from Vietnam. Pasco dragged South Korea's Kospi index 7.6 percent lower after ArcelorMittal, the world's biggest steelmaker, said quarterly earnings will drop. Hong Kong's Hang Seng Index declined 6.4 percent after Dah Sing Banking Group Ltd. said profit will fall. A worsening credit crisis that toppled Lehman Brothers Holdings Inc. and arrested growth in economies around the world has driven MSCI's Asian index down 43 percent this year. The International Monetary Fund projects the economies of the U.S., Japan and euro zone will shrink next year, said a fund staffer who cited revised forecasts. The U.S. economy contracted in the third quarter at the fastest pace since 2001, while analysts expect Asian companies' earnings growth to decline more than previously forecast, according to Morgan Stanley. Today's drop in the MSCI index wiped out yesterday's rally that followed Barack Obama's election to the U.S. presidency. The gauge rose 4.6 percent yesterday on speculation Obama's victory will lead to a stronger government response to the recession. The Asian index is now valued at 1.2 times the value of net assets