Jan. 17 (Bloomberg) -- Asian stocks fell for a third day and the Nikkei Stock Average posted its biggest drop in nine months after Japanese prosecutors investigated Livedoor Co. on suspicion it gave misleading information to shareholders.

The probe triggered slides in Internet-related shares including Softbank Corp. and Yahoo Japan Corp. Livedoor, the region's sixth-largest Internet company by market value, denied any wrongdoing.

``The allegations, whether they are true or not, cast doubt among investors on the quick-growth business model of net- related companies, which will have a big impact on their shares,'' said Masaki Iso, who oversees $6.7 billion as head of Japanese equities at Yasuda Asset Management Co. in Tokyo.

The Morgan Stanley Capital International Asia-Pacific Index lost 1.7 percent to 125.71 as of 11:44 p.m. in Tokyo, extending a 1.1 percent drop in the previous two sessions. The three-day slide was the longest since the six days ended Oct. 19.

A measure of energy stocks gained on higher oil prices, making it the only one of the MSCI Asia-Pacific index's 10 industry groups to advance. Woodside Petroleum Ltd. rose 3.4 percent, helping drive Australia's S&P/ASX 200 Index to a record.

The Nikkei slumped 2.8 percent to 15,805.95, erasing this year's gains. It was the biggest drop since April 18. Shares of Livedoor plunged by the exchange-imposed daily limit of 14 percent.

South Korea's Kospi index lost 2.3 percent, its biggest drop in three months. Kookmin Bank led declines by lenders after Internet news provider Edaily said profit at Woori Bank fell last year. Stock indexes slid in Hong Kong, Taiwan, Singapore, New Zealand, Thailand and Indonesia. They rose elsewhere.

Softbank, Yahoo Japan

Softbank, Japan's second-largest provider of high-speed Internet access, plunged 11 percent to 3,840 yen. The slide wiped 60 points off the Nikkei.

Yahoo Japan, the local unit of the world's most-visited Internet directory, slumped 8.4 percent to 164,000 yen. Rakuten Inc., the nation's biggest online retailer, lost 12 percent to 98,500 yen.

Officials from the Tokyo District Public Prosecutors Office entered Livedoor's headquarters in the Roppongi district in central Tokyo at about 6:30 p.m. local time yesterday. President Takafumi Horie's home was also being investigated, state- controlled broadcaster NHK reported.

The company may have violated regulations when its Livedoor Marketing Co. affiliate bought a company with cash instead of a stock swap that it had originally planned, the Nihon Keizai reported, citing people it didn't name.

Mother's Market

Livedoor is listed on the Tokyo Stock Exchange's Mothers market for start-up companies. The shares surged 90 percent last year, surpassing a 40 percent gain in the Nikkei. The company has split its stock three times in the past 2 1/2-years.

Companies affiliated with Livedoor also fell. Cecile Co., a catalogue mail-order sales company 35 percent owned by Livedoor Marketing, dropped 17 percent to 1,000 yen. Dynacity Corp., 21 percent owned by Livedoor, plunged 11 percent to 36,600 yen. Livedoor Marketing Co., a product of Livedoor's takeover of ValueClick Japan Inc., fell 16 percent to 5,150 yen.

Fuji Television Network Inc., Japan's biggest broadcaster, and Livedoor's biggest outside shareholder, dropped 9 percent to 292,000 yen.

In Australia, Woodside Petroleum and Santos Ltd. advanced on expectations rising prices for crude oil will boost earnings. Crude oil in New York gained 1.6 percent to $64.95 a barrel in after-hours trading. It was at $64.95 at 5:20 p.m. in Singapore, up 45 percent from a year earlier.

Sentiment Driver

Woodside Petroleum, Australia's second-largest oil producer, climbed 3.4 percent to A$43.40. Santos, Australia's biggest natural gas producer and the owner oil fields, added 0.6 percent to A$12.69.

``Higher oil prices will drive up sentiment for oil stocks,'' said Sally Yeo, who helps manage about $650 million at Pheim Asset Management in Singapore.

South Korea's Kospi dropped for the first day in four, after climbing to a record in intraday trading. Kookmin Bank, South Korea's largest lender, fell 2.1 percent to 70,200 won.

Woori Finance Holdings Co., South Korea's third-largest financial services company, dropped 2.3 percent to 18,850 won. Its unit, Woori Bank, had estimated net income of 1.5 trillion won ($1.5 billion) in 2005, 25 percent less than the previous year, Edaily said, citing the bank's preliminary calculations.

``There are some concerns that earnings growth at banks will slow this year,'' said Choi Chang Hoon, who helps manage $1.1 billion at Woori Asset Management Co. in Seoul. ``Shares of lenders are not likely to outperform the market for the time being.''

Shinhan Financial Group Ltd., the nation's second-largest financial services company, lost 2.3 percent to 40,000 won.

Cecile Co. (9937 JT)
Dynacity Corp. (8901 JT)
Fuji Television Network Inc. (4676 JT)
Livedoor Co. (4753 JT)
Livedoor Marketing Co. (4759 JT)
Rakuten Inc. (4755 JT)
Santos Ltd. (ST AU)
Softbank Corp. (9984 JT)
Woodside Petroleum Ltd. (WPL AU)
Yahoo Japan Corp. (4689 JT)

To contact the reporter on this story: Michael Tsang in Tokyo at mtsang1@bloomberg.net; Darren Boey in Hong Kong at dboey@bloomberg.net

Last Updated: January 17, 2006 09:48 EST