SINGAPORE: Asian stocks fell for a second week, led by Macquarie Bank and Taiwan Life Insurance, on concern the US subprime loans crisis is spreading to the region’s financial companies.
Macquarie Bank, Australia’s largest securities firm, erased its gains for the year after saying investors in some of its funds may lose as much as 25% of their money. Taiwan Life had its worst week in more than three years after reporting a hedge fund loss.
“Issues once specific to America are now flowing through to the rest of the world,” said Hans Kunnen, who helps manage $117bn at Colonial First State Global Asset Management in Sydney. “People are nervous because Macquarie looks and smells a lot like the companies that have been affected by this in the US”.
Losses were limited after Sumitomo Realty & Development Co and Hang Seng Bank joined other companies in the region in reporting higher profits.
The Morgan Stanley Capital International Asia-Pacific Index dropped 1.1% to 152.81. The measure plunged 3.9% in the five days ended July 27, the worst weekly drop since July 14, 2006, amid a rout that wiped out $2.1tn in global market value.
Japan’s Nikkei 225 Stock Average fell 1.8%, sliding for a third straight week. Benchmarks also declined elsewhere, except in Pakistan and China, where the CSI 300 Index climbed to a record high.
Shares recovered some lost ground in the US and Europe this week as better-than-forecast earnings helped allay concerns that the subprime crisis will slow economic growth.
The Standard & Poor’s 500 Index lost 1.7%, after shedding 4.9% the previous week, its biggest weekly loss since 2002, while the Dow Jones Stoxx 600 Index slipped 0.2%.
Macquarie Bank lost 7.6%, adding to its 10% drop last week. Macquarie Fortress Investments was forced to sell assets and use the proceeds to reduce borrowings and comply with lending covenants, according to a company statement. Investors may lose A$300mn ($256mn), the Australian newspaper reported.
Taiwan Life dropped 10%, the most since the period ended March 26, 2004. The insurer booked a T$428mn ($13mn) loss in the first half on its investment in the Bear Stearns High Grade Credit Strategies fund. Taiwan Life wrote off its entire investment in the fund to fully reflect the fund’s value, the company said.
“The subprime issue is not fully resolved and it could continue to haunt markets,” said Troy Angus, who helps manage $2.6bn at Paradice Investment Management in Sydney. Bear Stearns, manager of two hedge funds that collapsed last month, this week said it blocked redemptions from its Bear Stearns Asset-Backed Securities Fund.
The fund probably had losses in July, spokesman Russell Sherman said. DBS Group Holdings, Southeast Asia’s largest lender, slid 2.2%. DBS has $187mn invested in collateralised debt obligations based on asset-backed securities that have “various exposures” to the US subprime mortgage market, it said in an e-mailed statement.
These asset-backed products amount to 22% of the $850mn the bank invested in collateralised loan and debt obligations, the Singapore-based lender said.
Sumitomo Realty, Japan’s third-biggest property developer, surged 7.1% after saying first-quarter net income rose 54% as the country’s real estate market accelerates out of a 14-year slump.
Hang Seng Bank, Hong Kong’s second-largest lender by assets, gained 8.5%, the biggest weekly gain since the period ended September 28, 2001. The company said first-half profit rose 43%, exceeding some analysts’ predictions, on growth in lending, stock-trading fees and a one-time gain.
JFE Holdings Inc, Japan’s second-largest steelmaker, rose 5.2%. Net income rose 63% in the three months ended June 30 after the company raised prices for the metal to shipbuilders, JFE said.
Nippon Steel Corp said first-quarter profit gained 16% from a year earlier. The shares climbed 1.1%. “Generally, earnings in Asia are supportive,” said Henry Chan, who helps oversee more than $10bn of equities in Hong Kong as Baring Asset Management (Asia) Ltd’s head of Asia investments.
China’s CSI 300 jumped 6.8%, extending a three-week, 16% rally, on speculation corporate earnings growth will be sustained. The measure has more than doubled this year, regaining its lead as the best performer this year among 89 indexes tracked by Bloomberg.
China Yangtze Power Co, the owner of the world’s biggest hydropower project, said first-half net income climbed more than 70% from a year earlier after the company sold shares in a bank and increased electricity output. The stock rose 4.5%. – Bloomberg |
