Asian markets extended losses Tuesday, led by financial firms on renewed credit fears after the Wall Street Journal reported that Lehman Brothers may be headed for its first quarterly loss.
The Journal, citing sources familiar with the matter, said that Lehman Brothers may have to raise $3 billion to $4 billion in fresh capital, suggesting the bank could post its first quarterly loss since going public. New capital may be raised by issuing common shares, diluting existing shareholders, and would probably be announced in conjunction with its quarterly results due the week of June 16, the newspaper said.
The report also affected bonds and forex with the U.S. dollar giving up gains against the yen and safe-haven U.S. Treasuries rising.
Credit worries had already resurfaced in the morning session after ratings agency Standard & Poor's on Monday downgraded the debt ratings of three major U.S. investment banks, Wachovia ousted its chief executiveand British mortgage lender Bradford & Bingley warned of increased risks of default.
Tokyo's Nikkei 225 Average fell 1.6 percent, dragged down by Honda Motor and other exporters after the yen climbed against the dollar following the Journal's Lehman report. Construction firms fell after two were downgraded and shippers sank on profit-taking, weighing stocks down despite surges from battery-makers such as GS Yuasa after Japan Post said on Monday it was planning to switch its entire fleet of delivery vehicles to electric cars.
South Korea's KOSPI finished 1.5 percent lower. Financials such as Kookmin Bank and Shinhan Financial Group suffered on the Lehman report and the S&P ratings cut on the U.S. financial companies. Market sentiment was grim on renewed credit worries, a stronger won and persistent high oil prices weighing heavily on exporters.
Australian shares fell closed down 1.6 percent to a five-week low, led lower by financial firms such as Macquarie Group and the big banks But Metcash, Australia's largest grocery wholesaler, gained after it said its full-year profit rose 18.4 percent, boosted by a jump in sales of fresh produce
Hong Kong shares extended losses to fall 1.8 percent, led by hefty falls in Chinese telecom stocks as investors locked in gains from a run-up ahead of an industry restructuring. The market was also weighed down by the WSJ Lehman Brothers report. Shares in wireless carrier China Unicom tumbled over 14 percent after brokerages, including Morgan Stanley and Credit Suisse, downgraded the stock and advised clients to take profits.
Singapore's Straits Times Index was down 1.1 percent with blue chips sinking across the board. Shares of Singapore's three largest banks fell after tracking a sell-off in U.S. financial stocks, due to renewed fears the credit crunch is still not over. DBS Group, OCBC and United Overseas Bank were all on the decline.
Chinese stocks slipped as power producers and oil refiners pulled back on profit-taking, but China United Telecommunications rose after its Hong Kong-listed affiliate China Unicom
announced a long-awaited restructuring. The Shanghai Composite Index was down 0.7 percent.