Asian Bank Shares Tumble on U.S. Credit Concerns

Shares of Mitsubishi UFJ Financial Group, Macquarie Bank and other large banks in Asia tumbled on Wednesday, hit by renewed concern about their exposure to the high-risk U.S. subprime mortgage market and turmoil in global credit markets.

Sentinel Management Group, a $1.6 billion U.S. investment firm, told clients earlier this week that it wants to restrict them from withdrawing their money due to fear of liquidation, increasing worries about the credit environment.

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Shares of Mitsubishi UFJ, the world's biggest bank by assets, fell 5.3% by the close of morning trade in Tokyo, wiping out about 650 billion yen (US$5.5 billion) of market value. Earlier the stock hit a two-year low of 1.07 million yen.

The bank said on Tuesday it booked an appraisal loss of 5 billion yen ($42.42 million) on investments related to the subprime loan market. Its outstanding balance of investment in such products was 280 billion yen as of July.

"Investors are wondering if banks may have further losses than the ones they have already disclosed," said Shigemi Nonaka, special adviser at Polestar Investment Management in Tokyo. "If this is the extent of the loss, it won't be much of a problem because the overall loss has been small. But there is some doubt in the market."

In Australia, shares of Macquarie fell over 5%, after earlier hitting their lowest since September 2006. This month the investment bank warned investors that two of its debt funds could face losses of up to 25%.

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Macquarie shares have fallen 32% since hitting a lifetime high of A$98.64 in mid-May and are down 18% since the start of this month.

Of the A$220 billion (US$183.3 billion) worth of assets Macquarie managed globally at the end of June, about A$1 billion is exposed to leveraged funds business.

Other financial shares were also hit, with Babcock & Brown falling 5.3% and Allco Finance Group slumping 8.3%.

"There has been a lot of selling towards those banks because of the uncertainty, what it means as far as their future earnings are concerned," said Paul Xiradis, chief executive officer of boutique fund Aubsil Dexia.

Sydney-based mortgage lender RAMS Home Loans Group fell a further 5% after it said on Tuesday its earnings could be hit if global debt markets remained volatile.

RAMS, the fourth Australian financial institution to warn of the effects of a global credit squeeze in less than a month, saw its shares tumble as much as 32% on the news.