Asian Stocks Set for Worst Week Since 2008 on Recession Concern

Asian stocks fell, driving a regional benchmark index toward the biggest weekly drop in almost three years, on concern policy makers worldwide are running out of tools to avert another global economic recession.

BHP Billiton Ltd., the world’s No. 1 mining company, slumped 3 percent in Sydney after crude oil and metal prices tumbled yesterday and today. Korea Zinc Co., which produces gold and silver, plunged 15 percent in Seoul and Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, lost 4.1 percent. Esprit Holdings Ltd., a clothing retailer that gets most of its revenue in Europe, sank 4.6 percent in Hong Kong, taking its losses in the last two weeks to 58 percent.

The MSCI Asia Pacific excluding Japan Index dropped 2.1 percent to 371.65 as of 8:04 p.m. in Tokyo, poised for a 10 percent weekly drop, the most since November 2008. The measure has plunged 15 percent this month amid concern Europe’s debt crisis is spreading and signs of slowing U.S. economic growth.

“It would be flippant to suggest this is just a blip,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The aggressive selling of equity markets seems to reflect a heightened probability that the world is moving toward a recession. There’s also a sense that policy makers globally are limited in their ability to alleviate the situation because of the need for fiscal austerity.”

Volatility Surges

The Asia Pacific index pared declines today after finance chiefs from the Group of 20 nations said they would address “heightened downside risks” from sovereign debt and a slowing global economy. The gauge briefly resumed losses after Moody’s Investors Service downgraded the long-term deposit and senior debt ratings of eight rated Greek banks by two levels.

Market fluctuations have driven gauges of volatility up across the region, with Hong Kong’s HSI Volatility Index jumping 29 percent this week and a similar measure in Korea advancing 30 percent. Five-day historical implied volatility on the Asia Pacific excluding Japan Index jumped 45 percent this week, according to data compiled by Bloomberg.

The broader MSCI Asia Pacific Index that includes Japanese shares, which didn’t trade today, fell more than 20 percent from its May 2 high in intraday trading today, breaching a level some investors say signifies a bear market.

Australia’s S&P/ASX 200 Index closed down 1.6 percent. New Zealand’s NZX 50 Index dropped 0.9 percent, making it the last benchmark gauge in the developed world to erase all this year’s gains, according to data compiled by Bloomberg. South Korea’s Kospi Index lost 5.7 percent and Hong Kong’s Hang Seng Index sank 1.4 percent. Japanese markets are closed today for a public holiday.

‘Strong’ Response

The G-20 is “committed to a strong and coordinated international response to address the renewed challenges facing the global economy, notably from heightened downside risks from sovereign stresses, financial-system fragility, market turbulence, weak economic growth and unacceptably high unemployment,” according to a statement released in Washington.

Global share declines yesterday sent the MSCI All-Country World Index of 45 nations into a bear market for the first time in more than two years after the worsening European debt crisis and threat of a U.S. recession erased more than $10 trillion from equities since May. The world index has lost more than 20 percent since peaking on May 2.

U.S. stocks slumped yesterday in New York, sending the Dow Jones Industrial Average to its biggest two-day decline since December 2008. The Standard & Poor’s 500 Index fell 3.2 percent. Futures on S&P 500 Index gained 0.9 percent today.

European Stocks

The Stoxx Europe 600 Index tumbled 4.6 percent yesterday to a two-year low after the Federal Reserve signaled “significant downside risks” to the world’s largest economy and Moody’s Investors Service downgraded three U.S. banks. The gauge rose 0.8 percent today.

BHP Billiton, Australia’s biggest oil producer, fell 3 percent to A$34.55 in Sydney. Rio Tinto Group slid 3.8 percent to A$62.65. Alumina Ltd., a partner in the largest global producer of the material used to make aluminum, declined 1.1 percent to A$1.385. Woodside Petroleum Ltd., the nation’s No. 2 oil and gas producer, slid 3.6 percent to A$31.37. In Seoul, Korea Zinc tumbled 15 percent to 341,000 won and steelmaker Dongkuk Steel Mill Co. retreated 14 percent to 22,650 won.

A measure of primary metals traded in London fell 6.4 percent yesterday for a fifth straight daily decline. New York-traded copper futures dropped as much as 7.8 percent today. Crude oil for November delivery lost as much as 2.7 percent today in after-hours trading, having slumped 6.3 percent on the New York Mercantile Exchange yesterday.

Exporters Slide

Exporters also tumbled today. Esprit sank 4.6 percent to HK$8.23 in Hong Kong. Samsung slipped 4.1 percent to 758,000 won in Seoul and LG Electronics Inc., South Korea’s second-largest electronics maker, lost 4.6 percent to 58,200 won.

In Hong Kong, Li & Fung Ltd., the biggest supplier of clothes and toys to retailers including Wal-Mart Stores Inc., decreased 3.5 percent to HK$12.52.

HSBC Holdings Plc declined 1.9 percent to HK$59.50. The bank, Europe’s largest, may report lower revenue for the second half of the year than previously estimated, analysts at Espirito Santo Investment Bank wrote in a report following a meeting with HSBC’s finance director.

The MSCI Asia Pacific ex Japan Index lost 21 percent this year through yesterday, compared with a 10 percent drop for the S&P 500 and a decline of 22 percent for the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 10.4 times estimated earnings on average, compared with 11.4 times for the S&P 500 and 9.1 times for the Stoxx 600.

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