Financial firms batter Asian stocks

ASIAN stocks dropped for the first time in three days yesterday as declines in financial companies overcame gains in producers of raw materials.

Kookmin Bank, South Korea's biggest bank, dropped to a one-week low after profit fell and St George Bank Ltd, Australia's fifth-largest, tumbled the most in three weeks as bad debts and funding costs rose. BHP Billiton Ltd, the world's biggest miner, advanced after copper and gold prices gained, Bloomberg News said.

"Results so far are not showing that things are turning around, especially in the financials," said Leslie Phang, Singapore-based head of private client investments at Schroders Plc, which manages US$275 billion. "Earnings estimates in Asia haven't been lowered enough to take into account the macroeconomic headwinds."

More writedowns

The MSCI Asia Pacific excluding Japan Index shed 0.2% to 498.17 as of 6:33pm in Hong Kong, following a two-day, 2-percent advance.

Financial shares fell 1.1%, the biggest drag among the regional benchmark's 10 industry groups, and commodity producers gained 1%.

Japan's markets were closed for a holiday yesterday. Australia's S&P/ASX 200 Index lost 0.5%. About half of Asia's benchmarks retreated.

China Petroleum & Chemical Corp, the nation's largest refiner, slumped after crude oil prices surpassed a record US$120 a barrel. South Korea's Posco rose after it agreed to buy a stake in Sandfire Resources NL, an Australian minerals explorer.

Kookmin lost 3.2% to 69,200 won (US$69), declining for the first time since April 24. The company said first-quarter net income fell 47%, prompting Morgan Stanley and UBS AG to cut their ratings on the stock.

"While the thinking prevalent a month ago that the worst is over for the financial markets is no longer there, you'll still see some more writedowns by banks," said David Ng, who helps manage about US$1 billion at Hwang-DBS Asset Management in Kuala Lumpur. "We don't doubt there will still be credit weaknesses" in some banks, he said.

St George dropped 2.7% to A$26.98 (US$25.72), the biggest retreat since April 18, after saying net income declined 10%. Chief Executive Officer Paul Fegan cut his forecast for earnings per share growth to 8% to 10% for the full year, from 10% estimated in February.

Retail sales

The Reserve Bank of Australia yesterday left interest rates unchanged at a 12-year high of 7.25% after reports in the past month showed consumer and business confidence slumped, retail sales slowed and home building fell.

Malayan Banking Bhd dropped 3.8% to 7.70 ringgit (US$2.45), its lowest close since January 2004, after Citigroup Inc, UBS and Macquarie Group Ltd cut their share-price forecasts for Malaysia's largest bank.

The company said on Monday it will pay as much as 60.3 billion rupees (US$916 million) for a 20-percent stake in Pakistan's MCB Bank Ltd.

BHP Billiton added 0.7% to A$44.42, capping a four-day, 5.1-percent gain.

Rio Tinto Group rose 2.1% to A$141.93. Newcrest Mining Ltd added 2.5% to A$29.