Asian stocks fall on subprime concern

Asian financial stocks fell, led by DBS Group Holdings and Westpac Banking Corp, as the decline in the market for US subprime mortgages caused the cost of credit to rise.

Singapore's DBS Group Holdings said it has more collateralised debt obligations than previously disclosed, after a special purpose vehicle was forced to seek funds. Australia's central bank said the country's money market remains "under pressure'' as losses related to the US subprime mortgages discouraged lending.

"There's uncertainty'' as to whether more losses will emerge, said Leslie Phang, who oversees $1 billion at Commonwealth Private Bank in Singapore. "CDOs have become a taboo term for investors, regardless of what the underlying securities are.''

The Morgan Stanley Capital International Asia-Pacific Index was little changed at 149.87 at 6:37 pm in Tokyo. Japan's Nikkei 225 Stock Average lost 0.1 per cent to 16,287.49. Markets also fell in Australia, Singapore, Hong Kong, Indonesia and Thailand. Sri Lanka was closed for a holiday.

China Life Insurance Co and Foster's Group advanced after reporting higher profits. Hyundai Heavy Industries Co led gains among South Korean shipbuilders after STX Shipbuilding Co won a contract to build bulk carriers. Samsung Electronics Co fell after Citigroup Inc cut its rating on the stock.

The US Standard & Poor's 500 Index lost 0.9 per cent yesterday after a National Association of Realtors report showed that a glut of unsold homes in the world's largest economy rose to the most since October 1991.

DBS declined 2.9 per cent to S$19.80 in Singapore, its lowest close since August 17. The lender has S$2.4 billion ($1.6 billion) of CDOs, including S$1.1 billion in Red Orchid Secured Assets, which it didn't report earlier, it said in a statement to Singapore's exchange late yesterday.

The amount with "some exposure'' to the US subprime mortgage market remains unchanged at $188 million of investments, or 12 per cent of its CDO holdings, the bank said on Tuesday.

Lenders' losses on investments related to the US subprime, or higher risk, mortgages sparked a rout last month that erased more than $5.5 trillion of stock market value worldwide.

The CDO and the US subprime-related problems "will likely be a slow-motion, long-tailed headwind with worse-than-expected ultimate losses,'' analysts at Goldman, Sachs & Co wrote in a report.

They cut DBS to "neutral'' from "buy.''

Westpac, Australia's oldest bank, lost 1.1 per cent to A$26.75. National Australia Bank, the country's largest, declined 0.4 per cent to A$40. Commonwealth Bank of Australia, the second-biggest, lost 1.1 per cent to A$54.62.

Australia's money market remains "under pressure'' and the central bank will intervene if needed to stabilise the cost of credit amid the US subprime losses, Reserve Bank Deputy Governor Ric Battellino said on Tuesday.

"Yields on asset-backed commercial paper as yet have not fallen, indicating a continuing high degree of nervousness,'' Battellino told a retail services forum in Sydney.

Bank of China, the country's second biggest lender, fell 2.7 per cent to HK$3.91 in Hong Kong. The bank last week said it holds almost $9.7 billion of securities backed by the US subprime loans, the most of any Asian company.

China Life, the world's biggest insurer by market value, climbed 5.7 per cent to a record HK$37.15 in Hong Kong. The company said yesterday after the market closed that first-half profit more than doubled to 23.3 billion yuan ($3.1 billion) on returns from stock-market investments. Profit beat the 16.6 billion yuan average estimate of analysts in a Bloomberg survey.

Foster's, Australia's largest brewer, climbed 5.3 per cent to A$6.32, the most since September last year. The company boosted second-half profit 16 per cent after increasing sales of more profitable beers and hiking prices for wine. Earnings before one-time items rose to A$325.4 million ($269 million) in the six months to June 30, from A$280.7 million a year earlier.

Asustek Computer, Taiwan's largest maker of boards that connect computer components, gained 3.6 per cent to NT$92.20. Asustek said profit in the first six months rose 91 per cent from a year earlier to NT$13.58 billion ($411 million).

"Companies with solid scorecards are favored by investors,'' said Vickie Hsieh, who helps oversee $1.4 billion at President Investment Trust Corp in Taipei. "Ultimately they will make decisions based on corporate profitability.''

Hyundai Heavy, the world's biggest shipbuilder, added 7.9 per cent to 374,500 won in South Korea. Samsung Heavy Industries Co, the second largest, advanced 4.8 per cent to 46,950 won.

STX Shipbuilding, the world's sixth-largest shipbuilder, rose 6.8 per cent to 61,300 won. The company said yesterday it received a 202 billion won ($215 million) order from Europe to build four bulk carriers. STX has won about $7.5 billion in contracts this year, 75 per cent of its annual target.

Samsung Electronics, the world's largest maker of computer memory chips, lost 0.2 per cent to 576,000 won. Jay Choi, an analyst at Citigroup, cut his rating on the stock to "hold'' from "buy,'' according to a report.

Hynix Semiconductor Inc, the world's second-biggest maker of memory chips, fell 3.4 per cent to 33,200 won. Choi reduced his call on the stock to "sell'' from "buy.''