* Developed economies stare at looming recessions
* Big investors shrug off global stocks rally-State Street
* Asia stocks not even close to bottom-HSBC
By Kevin Plumberg
HONG KONG, July 25 (Reuters) - Asian stocks fell on Friday,
halting a four-day rally, after weak U.S. housing and jobs data
and volatility in the financial sector once again reminded
investors of the fragile state of the global economy.
Oil edged up from a seven-week low to around $125.50 a
barrel <CLc1>, though the view that U.S. energy demand is
deteriorating is keeping a lid on prices.
The dollar held below Thursday's one-month peak against the
yen, while Japanese government bond prices rose as concerns
about the global economy resurfaced.
Reports overnight fuelled fears Britain, the euro zone,
Japan and the United States are sliding toward recession.
German business sentiment this month suffered its biggest
decline since the 2001 attacks in New York and Washington,
while existing U.S. home sales were at the lowest in a decade.
"With the continuing deceleration in the global economic
backdrop, export-dependent Asian economies in general are
poised for weaker growth," said Thomas Lam, senior Treasury
economist with United Overseas Bank in Singapore.
"The negative spillover from the major economies on Asian
growth tends to occur with a lag," Lam said, adding that weak
U.S. growth late last year is being felt in Asia now.
Japan's Nikkei share average <> fell 1.65 percent
after finishing on Thursday at the highest since June 26.
Canon Inc <7751.T> was the second-biggest drag on the
index, with its shares down 3.4 percent after the company on
Thursday posted a 12 percent fall in quarterly profit.
Shares in the Asia-Pacific region excluding Japan
<.MIAPJ0000PUS> dropped 2 percent after hitting the highest
level in more than three weeks the previous day, an MSCI index
shows. It is down 20 percent this year.
South Korea's KOSPI <> slid 1.5 percent, led by shares
of Samsung Electronics <005930.KS> after the world's largest
memory chip maker posted a lower-than-expected rise in
second-quarter profit. An executive with the company said a
third-quarter recovery was unlikely.
Australia's benchmark index <> fell 3 percent as
National Australia Bank Ltd <NAB.AX> shares dropped more than
12 percent, which if maintained to the close would be their
biggest single-day decline since September 2001.
The firm booked A$830 million ($798 million) in additional
losses as a result of exposure to bad U.S. loans.
[]
LONG WAY TO FALL
As the MSCI Asia ex-Japan benchmark index looks likely to
post its best week since March, some investors might be asking
whether markets have bottomed. At the very least, have
valuations fallen enough to make stocks look relatively
attractive?
Not quite, said Garry Evans, strategist at HSBC in Hong
Kong.
Valuations in Asia are running at 2.1 times trailing book
value, far above the 1.2 times reached in the last three major
periods of market volatility in 1998, 2001 and 2003.
Using the usual price-to-expected earnings ratios to
measure relative value, shows that Asian stocks are quite
cheap. They have slid to 11.7 times 12-month forward earnings
from 17 times in the last year.
But Evans said consensus earnings forecasts for 2009 could
come down sharply in a matter of months.
"We think it unlikely, though, the bear market is over.
Investors have not yet capitulated," he said in a note. "In the
worst case, there could still be a long way to fall."
Institutional investors, who usually move large amounts of
money with longer time frames, apparently agreed.
They did not take part in this week's global equity rally
and actually pulled back their accumulation of European stocks
over the last month to the slowest since January, according to
State Street Global Markets, which tracks about $15.3 trillion
in assets held in custody by the bank.
In addition, large investors have been selling the U.S. and
European energy sectors as well as emerging market equities and
moving into sovereign bonds, State Street data showed.
"This mini-rally looks as though it is built on unsafe
foundations. State Street Global Markets flow measures suggest
that institutional investors are staying on the sidelines," the
firm said in a weekly note.
Japanese government bond prices rose on a drop in the
Nikkei and an overnight surge in U.S. Treasury debt prices.
Japan's benchmark 10-year yield <JP10YTN=JBTC>, which moves
in the opposite direction to the price, fell 8.5 basis points
to 1.570 percent, down more than 10 basis points from
Thursday's high and near a three-month low of 1.530 percent hit
last week.
The dollar slipped against the yen to 107.20 yen <JPY=>
after hitting a one-month high a day earlier. The euro was at
$1.5666 <EUR=>, down about 4 cents from a record high above
$1.60 SET last week.
