Asia Stocks Decline on Concern Ireland's Debt Crisis May Spread in Europe

Asian stocks fell amid speculation Europe’s sovereign-debt crisis may spread after Moody’s Investors Service said a bailout of Ireland may pose a “credit negative” for the country.

Hyundai Motor Co., which surpassed Toyota Motor Corp. as the largest Asian carmaker in Europe this year, dropped 2.5 percent in Seoul. BHP Billiton Ltd., the world’s biggest mining company, lost 0.6 percent in Sydney as copper slid in New York yesterday. Telstra Corp Ltd., Australia’s No.1 telephone company, climbed 1.9 percent after JPMorgan Chase & Co. boosted its stock rating to “overweight,” saying investors are underestimating the potential for share-price gains.

There’s concern “Ireland’s troubles could spill over into other smaller European Union countries, while the collapse of the Irish government just reinforces the political realities,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $135 billion. “Markets are also worried that China’s attempts to slow the economy and control inflation could weigh on commodity demand.”

The MSCI Asia Pacific excluding Japan Index slipped 0.3 percent to 463.46 as of 9:04 a.m. in Hong Kong. Japanese markets are closed for a holiday. The MSCI Asian gauge has risen 12 percent this year through yesterday on speculation growth in corporate profits will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound.

Australia’s S&P/ASX 200 Index dropped 0.4 percent and New Zealand’s NZX 50 Index declined 0.6 percent. South Korea’s Kospi Index slipped 0.3 percent.

Ireland Bailout

Futures on the U.S. Standard & Poor’s 500 Index fell 0.3 percent. U.S. stocks fell in New York yesterday, ending a three- day gain in the S&P 500, amid speculation the Irish bailout will fail to stem Europe’s debt crisis and as federal agents raided hedge funds to probe insider trading. The S&P 500 lost 0.2 percent to 1,197.84 as of 4 p.m. in New York. The Dow Jones Industrial Average slipped 24.97 points, or 0.2 percent, to 11,178.58.

Moody’s Investors Service said the bailout, which Goldman Sachs Group Inc. estimates may total 95 billion euros ($129 billion), may increase Ireland’s debt burden and pose a “credit negative” for the country, the second euro nation to need a rescue as the cost of saving the Irish banks made it vulnerable to a rerun of the Greek debt crisis that destabilized the currency.

The euro fell and Irish bonds pared their advance after Moody’s Investors Service said a “multi-notch” downgrade in Ireland’s Aa2 credit rating was “most likely” because the aid would increase the country’s debt burden.

Government to Resign

The rescue package failed to damp speculation that Portugal and Spain would follow Ireland in tapping the fund set up by the European Union and International Monetary Fund after the Greece rescue.

Irish Prime Minister Brian Cowen said his government will resign after passing the country’s budget, responding to calls from the Green Party for January elections amid voter discontent at his handling of the crisis.

“The admission by the Irish that they need financial aid is not unexpected, and nor is the negative stance taken by ratings agencies,” said Angus Gluskie, who manages about $350 million at White Funds Management Pty. in Sydney. “Attention has now turned to Spain and Portugal and investors may fret about risks for those countries until a satisfactory level of assurance about their financial outlook can be convincingly given.”

Crude fell for a second day in New York yesterday on speculation Europe’s debt crisis will spread, hindering economic growth and reducing fuel demand. Oil dropped 0.3 percent to settle at $81.74 a barrel on the New York Mercantile Exchange. Copper futures for March delivery sank 2.1 percent to $3.76 a pound at 10:55 a.m. in New York.