Asian markets slide on glum corporate outlook

[October 22, 2008]  TOKYO (AP) -- Asian markets veered sharply lower Wednesday, with Tokyo's Nikkei index tumbling nearly 7 percent, amid spreading pessimism over corporate earnings outlooks in the U.S. and at home. European markets also opened lower.

As credit markets show signs of improving, investors are turning their attention to dismal forecasts from major U.S. companies and Japanese media reports of disappointing sales and profit results - stoking fears of a global recession.

Asian markets opened lower after an overnight decline on Wall Street but extended losses as the day progressed.

Japan's Nikkei 225 stock average fell for the first time in three days, dropping 631.56 points, or 6.79 percent, to 8,674.69. Hong Kong's Hang Seng sank 5.2 percent, while South Korea's main index shed 5.1 percent.

"The credit crunch seems to be behind us, and we are shifting focus to corporate earnings and economic conditions, and clearly both are deteriorating," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.

In Europe, Britain's FTSE 100 was down 1.5 percent in morning trading, while Germany's DAX declined 2.6 percent.

Particularly hard hit were Japan's megabanks, which slumped after The Nikkei financial daily reported that Mitsubishi UFJ would miss its net profit projection for the April-September period by about two-thirds due to higher bad loan costs and the falling value of its shareholdings. Mitsubishi UFJ Financial Group Inc. shed 8.8 percent and Sumitomo Mitsui Financial Group Inc. dived 8 percent.

A stronger yen added to the misery in Japan, dragging down exporters such as automakers and consumer electronics firms. A stronger yen reduces the value of overseas profits when repatriated to Japan. The dollar fell to 99.29 yen in Asia Wednesday afternoon, down from 100.23 yen late Tuesday.

Sony Corp. plunged 9.3 percent, Canon Inc. was off 6.1 percent and Panasonic Corp. stumbled 8.4 percent. Canon is due to report earnings on Monday and Honda Motor Co. on Tuesday.

Japan's Toyota Motor Corp. lost 6.9 percent amid media reports that global annual sales will decline this year.

South Korea's currency, meanwhile, continued to slide against the dollar amid heavy selling of Korean stocks by foreign investors that has helped push share prices down 40 percent this year after years of strong gains. The won fell 3.1 percent against the U.S. dollar to 1,363, bringing its decline for this year to 31.3 percent.

"Foreign investors just keep selling in huge volumes in the Korean stock market," said Kim Joong-hyun, a strategist at Goodmorning Shinhan Securities in Seoul.

Shares of Samsung Electronics Co., which said it has withdrawn a $26 a share bid to acquire U.S.-based SanDisk Corp., fell 2.1 percent.

In Hong Kong, conglomerate Citic Pacific Ltd. plunged another 25 percent as local securities regulators announced a formal investigation into the company.

Shares in the the firm, the Hong Kong arm of the Chinese government's main investment company, crashed more than 55 percent in the prior session after it revealed nearly $2 billion in possible losses due to unauthorized currency bets made by a top executive.

In China, the benchmark Shanghai Composite Index fell 3.2 percent to 1,895.82.

"Most market heavyweights led the losses today because investors are disappointed with the third quarter earning reports," said Peng Yunliang, an analyst for Shanghai Securities. "It seems things may get worse in the fourth quarter."

Huaneng Power International Inc. fell 9.9 percent after the company reported a 2.2 billion yuan ($316 million) loss for the third quarter, while integrated coal miner and power generator China Shenhua Energy slipped 3.1 percent.

Fears that the U.S. is headed into a severe recession were stoked as bellwether corporations such as chemical manufacturer DuPont Co., Sun Microsystems and Caterpillar Inc. downplayed their prospects for the coming months.

On Tuesday, the Dow Jones industrial average fell 2.5 percent to 9,033.66, while the technology-heavy Nasdaq composite index shed 4.1 percent to 1,696.68.

U.S. stock index futures were about 1 percent lower, suggesting Wall Street would decline when it opened.

Those dismal U.S. earnings outlooks also sent oil prices below $70 a barrel as investors shrugged off a looming OPEC production cut. Light, sweet crude for December delivery dropped $2.42 to $69.76 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.

Oil prices are now less than half of their peak near $150 a barrel in mid-July.

Staggering high lending rates at the heart of the credit crisis continued to fall, with the Hong Kong interbank offered rate, also known as Hibor, for three-month loans dropping to 3.14 percent from 3.35 percent.

[Associated Press; By TOMOKO A. HOSAKA]

AP business writers Jeremiah Marquez in Hong Kong and Kelly Olsen in Seoul contributed to this report.

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