Asian Stocks Decline for Third Week as Recession Hurts Earnings

Feb. 28 (Bloomberg) -- Asian stocks declined for the third consecutive week as the deepening global recession crimped earnings and forced companies to raise capital.

Nomura Holdings Inc., Japan’s largest brokerage, slumped 7.8 percent on concern its $3.1 billion stock sale will dilute shareholder value. Woolworths Ltd., Australia’s biggest retailer, lost 5.4 percent on lower-than-expected profit. BlueScope Steel Ltd., the nation’s largest steelmaker, tumbled 29 percent after forecasting a second-half loss and slashing its dividend.

“Pessimism about company earnings hasn’t yet run its course,” said Naoyuki Torii, general manager of equities at Fukoku Mutual Life Insurance Co., which manages about $59 billion. “As massive losses are eating into companies’ capital, investors are expecting more businesses will sell new shares and dilute shareholders’ equity.”

The MSCI Asia Pacific Index lost 1.1 percent in the past five days to 75.19, extending losses after posting its steepest weekly plunge since October in the previous week. The gauge, which has lost 16 percent in 2009, fell to the lowest in more than five years on Feb. 24.

The Nikkei 225 Stock Average gained 2.1 percent this week, while Hong Kong’s Hang Seng index added 0.9 percent. China’s Shanghai Composite Index slumped 8.7 percent and Australia’s S&P/ASX 200 Index dropped 1.7 percent.

Canon Inc., the world’s largest camera maker, rallied 11 percent as a weaker yen boosted Japanese exporters’ earnings prospects. HSBC Holdings Plc, which owns a U.S. mortgage business, climbed 3.9 percent amid speculation American banks will be able to stave off nationalization.

Falling Estimates

MSCI’s Asian index slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid falling profits. Earnings estimates for companies in the gauge have been slashed 44 percent since the beginning of 2009, data compiled by Bloomberg show.

In latest signs the global recession is worsening, Japan’s Trade Ministry said on Feb. 27 the country’s manufacturers slashed production by an unprecedented 10 percent last month. U.S. government reports showed this week that new home sales tumbled 10 percent last month, while first-time claims for jobless benefits jumped to the highest level since 1982.

Governments from the U.S. to China and Australia have introduced policies and spending programs this year to ease the financial crisis. President Barack Obama delivered his first budget to Congress on Feb. 26, which seeks standby authority for as much as $750 billion in new aid to the financial industry.

Forecasting Losses

Nomura fell 7.8 percent to 414 yen. The company will sell shares valued at as much as 291.2 billion yen ($3.1 billion) to replenish capital eroded by four-straight quarterly losses, according to government filings.

Takefuji Corp., Japan’s third-largest consumer lender by market value, slumped 30 percent this week to 328 yen after the company forecast a full-year loss on lower income from lending.

Woolworths dropped 5.4 percent to A$26.14. The company reported said first-half profit rose 10 percent to A$983.3 million ($634 million) on Christmas demand at its stores, short of the A$1 billion median estimate of six analysts surveyed by Bloomberg News.

Bluescope tumbled 29 percent to A$2.23 after the Melbourne-based company cut its dividend by 77 percent. The global financial crisis has curbed demand and forced mills including ArcelorMittal and BlueScope to reduce output.

‘Bright Spots’

Canon climbed 7.6 percent to 2,540 yen as the yen traded at the weakest level in more than three months against the dollar. Game maker Nintendo Co., which sells four times more of its Wii game machines in the Americas than in Japan, surged 13 percent in the week to 28,490 yen in Osaka.

HSBC jumped 3.9 percent to HK$56.95 in Hong Kong. The Obama administration may require Citigroup Inc. to raise private capital and make changes to its board of directors as part of an effort to strengthen the bank, people familiar with the matter said on Feb. 27.

“There are bright spots and some valuations are tempting,” said Tim Schroeder, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “But the outlook is not rosy. There’s a great degree of uncertainty about the future.”