Aug. 19 (Bloomberg) -- Asian stocks fell, set to erase all gains by the regional index since the end of 2009, amid signs the world economy is slowing and concern that Europe’s debt crisis will damage the banking system. South Korea’s Kospi Index dropped the most since November 2008.

BHP Billiton Ltd., the world’s largest mining company, lost 4.1 percent in Sydney after oil and metal prices slumped. Billabong International Ltd., a surfwear maker that gets almost half its sales from the Americas, tumbled 26 percent after annual profit missed analyst estimates and U.S. jobless claims and consumer prices advanced faster than projected. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, dropped 1.7 percent in Tokyo. Markets also tumbled as Morgan Stanley slashed its outlook for Association of Southeast Asian Nations members’ stock indexes.

The MSCI Asia Pacific Index fell 3.2 percent to 119.22 as of 7:33 p.m. in Tokyo, set to erase all its gains since the start of 2010. The gauge is also headed for a fourth straight week of loss. About 12 stocks dropped for each that advanced on the index today. The Kospi Index sank 6.2 percent, its biggest slump since Nov. 20, 2008.

“Everything that’s going on is just eating away at investor confidence,” said Matt Riordan, who helps manage almost $6.6 billion in Sydney at Paradice Investment Management Pty. “Business confidence is tailing off and global growth slowing, and Europe’s debt situation appears to be getting worse and worse without any coordinated policy response. The worst case is that you go back to a 2008-type financial crisis.”

Japan’s Nikkei 225 Stock Average lost 2.5 percent, extending declines after an earthquake rattled buildings in Tokyo and triggered a tsunami alert for areas already affected by March’s record temblor.

Australia’s S&P/ASX 200 Index declined 3.5 percent. Hong Kong’s Hang Seng Index dropped 3.1 percent.

Indonesia, Singapore Cut

Indonesia’s Jakarta Composite Index plunged 4.4 percent after Morgan Stanley cut its estimate from a 13 percent advance by year end to just 1 percent. Singapore’s Straits Times Index decreased 3.2 percent as the brokerage cut its outlook on the MSCI Singapore Index to a 5 percent loss from a 22 percent gain.

Stocks worldwide have plunged in the past four weeks as concern the U.S. may enter a recession and as an intensifying European debt crisis evoked memories of late 2008, when credit markets froze after Lehman Brothers Holdings Inc. collapsed

The MSCI Asia Pacific Index lost 11 percent this year through yesterday, compared with drops of 9.3 percent by the S&P 500 and 18 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.3 times estimated earnings on average, compared with 11.5 times for the S&P 500 and 9.3 times for the Stoxx 600.

‘Lack of Confidence’

Futures on the Standard & Poor’s 500 Index slid 1.6 percent today. In New York, the index tumbled 4.5 percent yesterday on concern the global economy is slowing and speculation that European banks lack enough capital. The Stoxx Europe 600 Index plunged 4.8 percent in London yesterday, the biggest drop since March 2009.

“There’s a total lack of confidence in policymakers’ ability to defuse the situation,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “Fear is breeding fear now.”

BHP Billiton lost 4.1 percent to A$37.50 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, slid 8.3 percent to HK$20.90 in Hong Kong. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, sank 3.89 percent to A$35.44. Mitsubishi Corp., Japan’s largest commodities trading company fell 3 percent to 1,773 yen in Tokyo.

Metals, Oil

Copper futures for December delivery slid 1.7 percent on the Comex in New York yesterday, while a measure of primary metals traded in London dropped 2.4 percent. Crude oil for September delivery slumped 5.9 percent on the New York Mercantile Exchange yesterday, and today slid as much as 2.4 percent. Copper swung between gains and losses in London trading today.

Asian exporters fell today after a report showed the Federal Reserve Bank of Philadelphia’s general economic index plunged to minus 30.7 this month, the lowest reading since March 2009.

The August gauge exceeded the most pessimistic projection in a Bloomberg News survey in which the median estimate was for a reading of 2. Government data also showed more Americans than forecast filed applications for unemployment benefits last week, while the cost of living climbed in July by the most in four months.

Exporters Drop

Li & Fung Ltd., a supplier of toys and clothes to retailers including Wal-Mart Stores Inc., sank 4.7 percent to HK$12.72 in Hong Kong. Billabong tumbled 26 percent to A$3.82 in Sydney, a record plunge, after the surfwear maker scrapped an earnings forecast while reporting full-year net income that missed all analyst estimates.

Fortescue Metals Group Ltd., Australia’s third-biggest producer of iron ore, dropped 5 percent to A$5.75 after full- year profit rose 76 percent, less than analysts estimated. Hanjin Heavy Industries & Construction Co., a South Korean shipbuilder that gets almost half its revenue overseas, plunged 15 percent to 18,150 won amid concern orders will fall as the global economy slows.

Financial stocks declined following losses in European bank shares as the chief economist at Sweden’s financial regulator said his country’s lenders must do more to prepare for a worsening in Europe’s debt crisis that could freeze interbank markets and cut off funding.

Financial Shares

Mitsubishi UFJ dropped 1.7 percent to 352 yen in Tokyo. In Sydney, Commonwealth Bank of Australia, the nation’s biggest lender by market value, declined 2.9 percent to A$45.96. Australia & New Zealand Banking Group Ltd., the worst performer among Australia’s four largest banking stocks this year, dropped 4.5 percent to A$19.50 after saying trading income slumped, even as it reported a 7.7 percent gain in third-quarter profit.

“We have a fear-based, emotional-based market right now,” Erik Ogard, director of multi-strategy investments at Russell Investments, which oversees $163.4 billion, said in an interview with Susan Li on Bloomberg Television’s “First Up.” “There are real economic things to be worried about, however it’s the degree of the reaction that we think might just be a little overdone.”

--With assistance from Anna Kitanaka in Tokyo. Editors: Nick Gentle, John McCluskey

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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