* 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 sharply 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.
Japan's Nikkei share average <> fell 2 percent and
European stocks opened as much as 1 percent lower.
Oil rose from a seven-week low to around $125.95 a barrel
<CLc1>, though the view that U.S. energy demand is
deteriorating is keeping a lid on prices.
The U.S. dollar fell against the yen and Swiss franc, two
currencies associated with stability in times of market
turbulence, 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 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 only now.
Canon Inc <7751.T> was the second-biggest drag on Japan's
stock index, falling almost 5 percent after the company on
Thursday posted a 12 percent fall in quarterly profit.
Shares in the Asia-Pacific region excluding Japan
<.MIAPJ0000PUS> dropped 2.6 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.
Hong Kong's Hang Seng index <> slipped 1.9 percent.
China Shenhua Energy <1088.HK> fell 6.3 percent and was the
biggest decliner in the index after Beijing announced stricter
price controls on thermal coal used by power plants.
South Korea's KOSPI <> slid 1.7 percent, led by a fall
in 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 3.4 percent,
dragged down by a slide in National Australia Bank Ltd
<NAB.AX>. NAB shares fell as much as 14.6 percent to A$26.22
before ending down 13.5 percent, their biggest one-day
percentage fall since October 1987.
NAB 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 May, some investors might be asking
whether markets are near a bottom. At the very least, have
valuations fallen enough to make stocks 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 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 basis points to
1.575 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 fell 0.5 percent against the yen to 106.80 yen
<JPY=> after hitting a one-month high a day earlier. The euro
rose 0.2 percent to $1.5715 <EUR=>, down about 3 cents from a
record high above $1.60 set last week.
