Aug. 24 (Bloomberg) -- Asian stocks fell for the first time in five days after Bank of China Ltd. said it had almost $9.7 billion invested in subprime loans in the U.S., where the No. 1 mortgage provider yesterday forecast a recession.

Bank of China, the nation's No. 2 lender, was poised for its biggest drop since going public last year. BHP Billiton Ltd. and Posco slid on concern demand for raw materials will cool.

``Bank of China was a negative surprise,'' said Thue Isen, who manages about $1 billion in Asian equities at Bankinvest Group in Singapore. ``If you talk about recession or a slowdown in the U.S., I would put a big question mark on earnings estimates for Asia and the market would have to adjust to that.''

China Unicom Ltd., the country's second-biggest mobile-phone operator, and Insurance Australia Group Ltd., the nation's largest auto and home insurer, fell after earnings declined.

The Morgan Stanley Capital International Asia-Pacific Index lost 0.8 percent to 147.36 as of 12:39 p.m. in Tokyo. The decline trims this week's gain to 7.5 percent, which is the best performance since March 2002 and follows a four-week, 15 percent slump. A measure of financial companies was the biggest drag among the benchmark's 10 industry groups today.

Japan's Nikkei 225 Stock Average dropped 0.7 percent to 16,200.26, while Hong Kong's Hang Seng Index fell 1 percent from a three-week high. Benchmarks slid in other markets open for trading, except for China, where the CSI 300 Index was set for its best week since it was introduced in April 2005.

The Standard & Poor's 500 Index slipped 0.1 percent yesterday as U.S. stocks fell for the first time in six days after the chief executive of the biggest U.S. mortgage lender said the world's largest economy may be heading for a recession. Europe's Dow Jones Stoxx 600 Index advanced 0.2 percent.

Bank of China, ICBC

Bank of China slumped 5.6 percent to HK$3.86 in Hong Kong. Its almost $9.7 billion of securities backed by U.S. subprime, or higher risk, related investments are the most to be disclosed by any Asian company.

The nation's largest foreign-exchange bank set aside 1.15 billion yuan ($152 million) against possible losses on asset- backed securities and collateralized debt obligations backed by loans to borrowers with poor credit histories.

``It's a little bit more than we expected and that's why the share price is suffering a great loss today,'' said Ben Kwong, head of research at KGI Asia Ltd. in Hong Kong. ``The subprime problem will continue to plague the company.''

Industrial & Commercial Bank of China Ltd., the country's largest, lost 1.2 percent to HK$4.84. The lender also said yesterday it had $1.2 billion of subprime-related securities. Macquarie Bank Ltd., Australia's largest securities company, slid 2.3 percent to A$75.44.

Chance of Recession

BHP Billiton, the world's biggest mining company, retreated 2.1 percent to A$36.90. Rio Tinto Group, the third largest, slid 1.9 percent to A$89.26. Nippon Mining Holdings Inc., Japan's No. 1 copper producer, lost 2.5 percent to 944 yen.

Countrywide Financial Corp. Chief Executive Angelo Mozilo, speaking yesterday on the CNBC television network, said the housing slump may hurt consumer spending and lead to an economic contraction.

Mounting defaults on subprime mortgages are extending a housing slowdown that is already the worst in 16 years. Confidence among U.S. homebuilders fell in August to the lowest since 1991, as cancellations and tighter lending standards took a toll, the National Association of Home Builders said Aug. 15.

There is a 20 percent chance of a global recession as financial and economic conditions deteriorate, UBS AG economists led by Andrew Cates said in a report today.

China Unicom, Canon

The housing problem ``is not over by any means,'' said Eric Betts, head of research at Nomura Australia Ltd. in Sydney. ``Wait until the next body floats to the surface. We're just trying to find our way through the volatility.''

Posco, South Korea's biggest steelmaker, declined 2.5 percent to 513,000 won. Nippon Steel Corp., the world's second- largest, slid 0.9 percent to 801 yen.

China Unicom slid 1.9 percent to HK$13.14 in Hong Kong. Net income fell to 170 million yuan from 1.4 billion yuan after the company booked a loss from selling convertible bonds to South Korea's SK Telecom Co., according to figures Bloomberg derived by subtracting first-quarter results from six-month earnings reported by the company yesterday.

Insurance Australia's profit dropped 31 percent from a year earlier to A$207 million ($170 million) in the second half ended June 30 on higher payouts for storms and competition in its home market. That was less than the A$263 million median estimate of analysts surveyed by Bloomberg. The stock dropped 5.8 percent to A$5.39.

Canon Inc., the world's biggest digital-camera maker, climbed 2.9 percent to 6,440 yen. The company said it will buy back up to 23 million shares, or 1.7 percent of its total outstanding shares, for as much as 100 billion yen ($860 million). It will purchase the shares from Aug. 24 through Sept. 25.

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

Last Updated: August 24, 2007 00:11 EDT