May 6 (Bloomberg) -- Asian stocks dropped for the first time in three days as declines in financial companies overcame gains in producers of raw materials.

Kookmin Bank, South Korea's biggest bank, dropped to a one- week low after profit fell and St. George Bank Ltd., Australia's fifth-largest, tumbled the most in three weeks as bad debts and funding costs rose. BHP Billiton Ltd., the world's biggest mining company, advanced after copper and gold prices gained.

``Results so far are not showing that things are turning around, especially in the financials,'' said Leslie Phang, Singapore-based head of private client investments at Schroders Plc, which manages $275 billion. ``Earnings estimates in Asia haven't been lowered enough to take into account the macroeconomic headwinds.''

The MSCI Asia Pacific excluding Japan Index dropped 0.2 percent to 498.17 as of 6:33 p.m. in Hong Kong, following a two- day, 2 percent advance. Financial shares fell 1.1 percent, the biggest drag among the regional benchmark's 10 industry groups, while commodity producers gained 1 percent.

Japan's markets are closed for a holiday. Australia's S&P/ASX 200 Index lost 0.5 percent, while China's CSI 300 Index dropped 1.1 percent. About half of Asia's benchmarks retreated.

China Petroleum & Chemical Corp., the nation's largest refiner, slumped after crude oil prices surpassed a record $120 a barrel. South Korea's Posco rose after it agreed to buy a stake in Sandfire Resources NL, an Australian minerals explorer.

Banks Drop

U.S. stocks fell yesterday, sending the Standard & Poor's 500 Index lower for the first time in three days. Macy's Inc. led a decline among retailers on concern record oil prices will damp consumer spending and Yahoo! Inc. tumbled the most in almost two years after Microsoft Corp. abandoned its $50 billion bid for the company.

Kookmin lost 3.2 percent to 69,200 won, declining for the first time since April 24. The company said first-quarter net income fell 47 percent, prompting Morgan Stanley and UBS AG to cut their ratings on the stock.

Shinhan Financial Group Ltd., the second largest, dropped 2.7 percent to 57,300 won, its steepest loss since April 4. South Korea's second-largest financial company said first-quarter profit retreated 35 percent on higher funding costs.

``While the thinking prevalent a month ago that the world is over for the financial markets is no longer there, you'll still see some more writedowns by banks,'' said David Ng, who helps manage about $1 billion at Hwang-DBS Asset Management Sdn. in Kuala Lumpur. ``We don't doubt there will still be credit weaknesses'' in some banks, he said.

St. George, RBA

St. George dropped 2.7 percent to A$26.98, the biggest retreat since April 18, after saying net income declined 10 percent. Chief Executive Officer Paul Fegan cut his forecast for earnings per share growth to 8 percent to 10 percent for the full-year, from 10 percent estimated in February.

The Reserve Bank of Australia today left interest rates unchanged at a 12-year-high of 7.25 percent after reports in the past month showed consumer and business confidence slumped, retail sales slowed and home building fell.

Malayan Banking Bhd. dropped 3.8 percent to 7.70 ringgit, its lowest close since January 2004, after Citigroup Inc., UBS and Macquarie Group Ltd. cut their share-price forecasts for Malaysia's largest bank. The company said yesterday it will pay as much as 60.3 billion rupees ($916 million) for a 20 percent stake in Pakistan's MCB Bank Ltd.

Record Crude

BHP Billiton advanced 0.7 percent to A$44.42, capping a four-day, 5.1 percent gain. Rio Tinto Group, the world's third- biggest mining company, rose 2.1 percent to A$141.93. Newcrest Mining Ltd., Australia's largest gold producer, added 2.5 percent to A$29.

Copper prices advanced 3.3 percent yesterday in New York, while gold added 1.9 percent.

China Petroleum, the nation's largest oil refiner known as Sinopec, dropped 2.2 percent to HK$8.52, ending a four-day, 8.1 percent rally, on speculation profit from making gasoline, diesel and kerosene will be squeezed by the rising cost of crude.

Crude oil for June delivery yesterday rose to an intraday high of $120.36 a barrel after the Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the U.S. economy, grew for the first time since December, signaling higher energy use.

Cnooc Ltd., China's biggest offshore oil explorer, jumped 3 percent to HK$13.90 in Hong Kong. Woodside Petroleum Ltd., Australia's No. 2 oil and gas explorer, added 1.3 percent to A$60.

Posco Acquisition

Posco, Asia's third-biggest steelmaker, climbed 3.3 percent to 510,000 won, its highest close since April 7. The company agreed to buy a 19.9 percent stake in Sandfire Resources for A$7.2 million ($6.7 million).

In the Philippines, Manila Electric Co. slumped 8.3 percent to 72 pesos, its biggest retreat since Sept. 3. Credit Suisse Group cut the stock's rating to ``underperform'' from ``neutral,'' saying the company will probably be unable to raise its rates this year because of political pressure to control electricity prices.

Nine Dragons Paper (Holdings) Ltd., China's biggest maker of containerboard used for packaging, had the regional index's second-largest gain. The shares jumped 9.2 percent to HK$9.94 in Hong Kong after saying it will buy a paper maker in Vietnam.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net

Last Updated: May 6, 2008 06:36 EDT