Thursday, August 21, 2008

Asia sinks as credit crisis victims mount

Asia sinks as credit crisis victims mount

By Andrew Wood

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Financial shares dragged Asia Pacific stock markets lower on Thursday. Worries about further credit crisis-related losses deepened after profits dropped by a quarter at Babcock & Brown, the Australian investment bank. China shares fell the most, reversing much of Wednesday’s 7.6 per cent surge, and Hong Kong made its worst close for a year.

The MSCI Asia Pacific Index had lost 0.7 per cent to 122.59 by late afternoon in Tokyo.

Oil regained losses made overnight in the US. Nymex light sweet crude was trading $1.24 higher at $116.80 a barrel by late afternoon in Singapore.

The Nikkei 225 average closed 0.8 per cent lower at 12,752.21 and the broader Topix index ended 0.7 per cent lower at 1,224.53

Banks, car makers, technology companies, producers of electronic consumer goods accounted for two-thirds of the fall. A sudden appreciation in the yen to Y108.64 from Y109.60 before lunch in Tokyo was not good for exporters.

The electronic components maker Kyocera was the Nikkei’s worst performer. It fell 2.5 per cent to Y8,930, its worst close for a month. Honda Motor fell by 1.4 per cent to Y3,530. The games company Nintendo dropped 3.6 per cent to Y48,600 and the camera and office equipment maker Canon lost 1.0 per cent to Y4,990.

Sumitomo Mitsui Financial, Japan’s second biggest bank by stock market value, fell by 2.1 per cent to Y661,000 after HSBC downgraded the shares.

Big trading houses continued to rise as oil prices rallied – they make a big chunk of their profit from dealing in crude. Mitsui rose by 1.9 per cent to Y1,753 and Marubeni was up 2.3 per cent to Y676.

In China, oil refiners and financial companies dominated the list of ten worst performers. The Shanghai composite index closed 3.6 per cent lower at 2,431.72 as worries about inflation resurfaced.

There was little sign of Wednesday’s exuberance when the market jumped 7.6 per cent on hopes that the government would announce measures to boost share prices.

PetroChina, the world’s second-biggest company in stock market value, fell by 3.7 per cent to Rmb13.70. PetroChina and its rival Sinopec, which fell by 6.6 per cent to Rmb10.12, tend to react badly when oil prices rise. They must pay market rates for crude but Beijing sets the price they can charge for fuel and other refined products, which squeezes profit margins.

Otherwise financial companies bore the brunt of the market’s fall. Industrial & Commercial Bank of China, the world’s most valuable in stock market terms, fell by 2.9 per cent to Rmb4.76 and China Construction Bank lost 3.4 per cent to Rmb5.32.

China Life Insurance dropped 2.1 per cent to Rmb24.88.

But some stock brokers did continue to benefit from the rumours of official intervention. Haitong Securities gained 4.7 per cent to Rmb17.30 and Citic Securities gained 3.8 per cent to Rmb19.

In Hong Kong, the Hang Seng index closed 2.6 per cent lower at 20,392.06 – its worst close since 17 August 2007 – and the main sub-index of mainland companies listed in the territory was 2.4 per cent lower at 10,916.50

China South Locomotive & Rolling Stock’s debut in Hong Kong was muted compared with its 83 per cent jump during its first day of trading in Shanghai on Monday. For the second part of the $1.5bn dual listing, China South Loco shares gained as much as 18 per cent on their offer price, but were just 1.9 per cent higher at HK$2.65 by the end of the day.

Australian shares fell. The S&P/ASX 200 index closed 1.1 per cent lower at 4,875.20.

Babcock & Brown shares plunged by more than a third in value to their lowest since the investment bank floated in 2004. It said net income dropped by 24 per cent and that Phil Green, the chief executive, would leave. The shares closed 35.7 per cent down at A$2.22 – a loss of 91.8 per cent so far this year.

Babcock’s larger rival, Macquarie, fell by 3.7 per cent to A$47.50. Westpac Banking made the markets biggest loss by dropping 3.2 per cent to A$21.66.

Qantas Airways rose by 2.4 per cent to A$3.48 after announcing a 46 per cent jump in annual pre-tax profit to A$1.4bn thanks to carrying more passengers and freight – although it warned that high fuel costs and tough industry conditions meant income may fall in the future.

In India, the Sensex was 2 per cent lower by mid afternoon in Mumbai at 14,385.10. ICICI Bank led the market lower by falling 3.2 per cent to Rs656.85.

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