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Dec. 19 (Bloomberg) -- Asian stocks fell after reports North Korean leader Kim Jong Il has died, extending earlier losses sparked by Fitch Ratings saying it may cut the credit ratings of European nations.
HSBC Holdings Plc, Europe’s biggest lender, dropped 2 percent in Hong Kong on speculation the worsening European debt crisis will hurt bank earnings. Samsung Electronics Co., South Korea’s biggest exporter that gets about 20 percent of sales from Europe, slid 3.6 percent in Seoul. Billabong International Ltd. slumped 44 percent in Sydney after the surfwear maker cut its earnings outlook. The Kospi 200 Volatility Index of Korean option prices jumped up to 20 percent on news of Kim’s death.
“The market has been pretty weak, and when something unexpected happens in this kind of sentiment, people want to go for safety,” said Tim Leung, who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. “Whether a successor would be able to stabilize the situation with Korea is important to see. In the short term, people would want to close some of their positions to see what happens next.”
The MSCI Asia Pacific Index slid 1.8 percent to 110.45 as of 7:34 p.m. in Tokyo, heading for its lowest close since Nov. 25. Almost five shares fell for each that rose in the measure. The gauge dropped 2.3 percent last week as signs of slowing economic growth in China and Japan and concern that Europe’s debt crisis is worsening overshadowed improving U.S. data.
Japan’s Nikkei 225 Stock Average declined 1.3 percent. Australia’s S&P/ASX 200 fell 2.4 percent. Hong Kong’s Hang Seng slipped 1.2 percent and China’s Shanghai Composite Index lost 0.3 percent.
Losses deepened after Yonhap News reported that Kim Jong Il, the second-generation North Korean dictator, died at age 70. South Korea’s Kospi Index sank 3.4 percent. The Kospi 200 volatility gauge closed 10 percent higher, the biggest advance in five weeks, at 27.98, indicating options traders expect a swing of 8 percent in the next 30 days.
Futures on the Standard & Poor’s 500 Index climbed 0.6 percent today, reversing a loss of as much as 0.7 percent. The index rose 0.3 percent in New York on Dec. 16 as gains by commodity producers overshadowed concerns about the European debt crisis. Fitch Ratings put credit ratings for France, Belgium, Spain, Slovenia, Italy, Ireland and Cyprus under review for a downgrade, saying a “comprehensive” solution to Europe’s crisis is “technically and politically beyond reach.”
“Europe’s situation continues to be tough,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “We are likely to see more downgrades for government debt and banks. Stocks will take a hit every time that happens.”
Shares of financial companies and exporters to Europe dropped on concern their earnings will decline as the region’s sovereign-debt crisis spreads. Finance ministers in the euro region are holding a conference call at 3:30 p.m. Brussels time today to meet a self-imposed deadline to channel additional bailout funds and put together new budget rules to stem the debt crisis and buoy investor confidence.
HSBC fell 2 percent to HK$57.65 in Hong Kong. Westpac Banking Corp., Australia’s second-biggest lender, dropped 2.2 percent to A$20.05 in Sydney. Samsung Electronics slid 3.6 percent to 1.007 million won Seoul.
Stocks extended losses today even after the U.S. Congress passed a $1 trillion spending bill to avert a government shutdown.
China Home Prices
Chinese developers declined as China’s home prices posted the worst performance this year, with more than half of the 70 biggest cities monitored in November recording declines after the government reiterated plans to maintain property curbs.
China Overseas Land & Investment Ltd., the biggest mainland homebuilder listed in Hong Kong, sank 3.4 percent to HK$13.84 in Hong Kong. China Resources Land Ltd., a state-owned developer, dropped 4 percent to HK$12.48. Agile Property Holdings Ltd., a real-estate company partly owned by JPMorgan Chase & Co., fell 3.2 percent to HK$6.66.
The MSCI Asia Pacific Index lost 20 percent this year, compared with a 3 percent drop by the S&P 500 and a 15 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.3 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10.2 times for the Stoxx 600.
Billabong tumbled 44 percent to A$2.03, poised for its biggest decline on record, after saying first-half profit may fall by as much as 26 percent as sales stalled in three key markets, including Australia, Europe and North America. The forecast comes less than two months after the company predicted a strong increase in earnings.
Gauges of raw-material producers posted the biggest decline among the 10 industry groups in the MSCI Asia Pacific Index. Crude oil futures traded near a six-week low in New York. Copper, zinc and nickel declined for the first time in three days.
--With assistance from Yoshiaki Nohara and Masaaki Iwamoto in Tokyo. Editors: John McCluskey, Drew Gibson.
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