27 Dec 2008
Dec. 27 (Bloomberg) -- Asian stocks fell for the first week in three on mounting signs the deepening global recession is hurting corporate profits.PetroChina Co., the nation's largest oil producer, lost 9.3 percent as crude prices plunged amid mounting signs of weakness in global economies. Toyota Motor Corp.'s forecast for its first-ever operating loss dragged South Korean rivals Hyundai Motor Co. and Kia Motors Corp. more than 16 percent lower on concern automobile demand is plummeting.
"The global economic situation is continuing to deteriorate," said Karma Wilson, Sydney-based head of Asian equities at AMP Capital Investors, which manages about $61 billion. "We're going to go through a very difficult earnings season, particularly in the first quarter. There's not a lot of positive news on the horizon at the moment."
The MSCI Asia Pacific Index fell 2.4 percent to 87.40 this week. Gauges of energy stocks and raw-material producers posted the biggest declines among the benchmark index's 10 industry groups this week.
The MSCI Asia Pacific has slumped 45 percent in 2008, the worst annual performance in its two-decade history, as the most severe financial crisis since the Great Depression dragged economies worldwide into recessions. Losses and writedowns tied to the collapse the U.S. subprime-mortgage market rose above $1 trillion this week.
Analysts have cut their average earnings-per-share estimate for companies on the index by 29 percent since the beginning of the year, data compiled by Bloomberg shows.
Support Measures
Japanese government reports in the week showed that factory output tumbled in November, while unemployment rose and exports plunged the most on record.
The financial and economic turmoil has prompted countries including the U.S., China and Japan to slash interest rates and announce spending packages. Thai Prime Minister Abhisit Vejjajiva yesterday pledged 300 billion baht ($8.6 billion) to help counter a slump in Southeast Asia's second-largest economy.
Petrochina retreated 9.3 percent to HK$6.36 in Hong Kong. Oil & Natural Gas Corp., India's biggest energy exploration company, lost 9.6 percent to 642.95 rupees. Rio Tinto Group, the world's third-largest mining company, slumped 6.2 percent to A$36.59 in Sydney as the prices of metals including copper fell.
Crude oil for February delivery gained 11.4 percent this week to $37.73 a barrel in New York, paring its December slump to 23.5 percent.
Profit Forecasts
Toyota, the world's second-largest automaker, on Dec. 22 forecast its first operating loss since the company formed 71 years ago. Hyundai Motor, South Korea's largest automaker, retreated 16 percent to 38,000 won, while Kia lost 22 percent to 6,320 won. Toyota finished the week unchanged at 2,900 yen.
"I don't think you can simply say all the bad news has been discounted by the market," said Koichi Ogawa, chief portfolio manager at Tokyo-based Daiwa SB Investments Ltd., which manages $28 billion. "We're still going to see more profit forecast downgrades."
Chinese shares dropped in spite of a 0.27 percentage point reduction in one-year interest rates by the nation's central bank as investors remained concern government action won't be enough to avert a slowdown.
"This rate cut is an indication that economic activity in China is slowing much faster than anticipated," said Roberto Lampl, who manages $4 billion in emerging-market stocks, including Chinese shares, at ING Investment Management in The Hague. "Chinese authorities are using monetary policy to reignite demand because of this weaker-than-expected economic environment."
Job Cuts
Poly Real Estate Group Co., China's second-largest developer by value, slid 19 percent to 14.79 yuan. Wuhan Iron & Steel Co., China's third-biggest steelmaker, lost 16 percent to 5.10 yuan.
Hon Hai Precision Industry Co., the world's biggest contract maker of electronics, fell 10 percent to NT$61.50 after slumping demand forced the company to reduce its workforce.
Fortescue Metals Group Ltd., Australia's third-biggest iron ore producer, plunged 16 percent to A$1.805 in a holiday- shortened week after selling 1.5 million shares at a discount to pay debt and raise cash.
