Asian stocks fell, led by semiconductor-related shares including Tokyo Electron Ltd. and Samsung Electronics Co., after Intel Corp. said profit margins this year may be narrower than its own forecast. Morgan Stanley Capital International's Asia-Pacific excluding Japan Index, which tracks almost 600 stocks in the region, slid 0.9 percent to 215.83 at 1:44 p.m. in Tokyo. The MSCI Asia-Pacific excluding Japan Information Technology index accounted for 15 percent of the benchmark's decline.
``It looks like there will be some further weakness in tech stocks,'' said Bich Pham, who helps oversee $600 million of Asian stocks at TAL Global Asset Management Ltd. in Hong Kong. He said he's considering selling stocks such as Taiwan Semiconductor Manufacturing Co. Japanese banks rose, led by Mitsubishi Tokyo Financial Group Inc., after UFJ Holdings Inc. said it will seek a merger with the nation's largest lender by market value, spurring speculation other lenders will combine to cut costs and reduce bad loans. Shares of UFJ, the only one among Japan's four largest lenders to post a loss last fiscal year, were bid higher.
``A weaker bank tying up with a strong bank is surely great news,'' said Marc Desmidt, who helps manage about $9.2 billion as head of investment at Merrill Lynch Investment Managers Co. in Tokyo. ``Consolidation in the industry would mean more cost cutting, revenue growth and these sorts of things will create much more upside to their earnings.'' Stock benchmarks fell in every country except Singapore. Intel lost 4.8 percent in extended U.S. trading. The company said its gross margin, or the percentage of revenue left after subtracting the cost of goods sold, for this year will be about 60 percent, compared with a previous forecast of about 62 percent.
Chip Stocks
``This is a signal that demand is not so good,'' said Maggie Chien, who helps manage the equivalent of $30 million at Capital Investment Management Co. in Taipei. ``This will prompt Asian suppliers to cut prices to compete, further squeezing margins.'' Tokyo Electron, the world's second-largest maker of chip- production equipment, fell 3 percent to 5,450 yen. The company, which gets more than half of its revenue from overseas, is a supplier to Intel. Advantest Corp., the world's biggest maker of equipment used to test computer memory chips, shed 3 percent to 6,520 yen. Samsung Electronics, the world's largest maker of computer- memory chips, slid 1.9 percent to 425,500 won. The South Korean company is expected to Friday report a record 3.2 trillion won ($2.8 billion) profit in the second quarter, according to the mean estimate of 24 analysts surveyed by Thomson Financial.
Hynix Semiconductor Inc., the world's third-largest maker of computer memory chips, lost 0.4 percent to 11,200 won. Singapore's ST Assembly Test Services Ltd., the world's fourth-largest chip- tester, fell 1.5 percent to S$1.34.
Japanese Banks
The Topix Bank Index climbed 3.4 percent. Mitsubishi Tokyo surged 11 percent to 1.06 million yen. UFJ, the nation's No. 4 lender, was bid 11 percent higher than yesterday's close. The stock hasn't traded yet because fewer shares were offered for sale than investors wanted to buy, according to exchange rules. ``UFJ's board agreed this morning to ask Mitsubishi Tokyo to consider a merger,'' UFJ spokesman Naoki Hirokawa said in a phone interview. The merger would create a bank with 188.7 trillion yen ($1.7 trillion) of assets, surpassing Citigroup Inc. as the world's biggest. UFJ had 3.95 trillion yen of bad loans as of March 31, the most among Japan's four biggest banks. Folding UFJ into Mitsubishi Tokyo, which had the lowest bad-debt ratio, may help Prime Minister Junichiro Koizumi meet his goal of cutting problem loans in half by the end of the next business year. Mizuho Financial Group Inc., Japan's largest bank by assets, rose 2.4 percent to 474,000 yen. Sumitomo Mitsui Financial Group Inc., the third largest, added 3.8 percent to 741,000 yen.
`Financial Muscle'
A merger would bring ``financial muscle, which is now essential,'' said Donald Gimbel, who helps manage about $1.8 billion at Carret & Co. in New York. ``It buries a lot of bad debts in an avalanche of capital.'' UFJ's Hirokawa also said the board agreed to cancel a planned sale of its trust business to Sumitomo Trust & Banking Corp. and will ask the lender to agree to the termination. Sumitomo Trust, Japan's sixth-largest lender, slumped 9.2 percent to 689 yen, the biggest drop since Oct. 23. The bank said last month it was in talks to buy UFJ's trust unit to create the nation's largest investment trust business, with 21.2 trillion yen ($188 billion) of assets. UFJ was ordered by the Financial Services Agency last month to improve compliance after the regulator said the bank evaded an audit and concealed documents relating to problem borrowers. A merger would result ``in the disappearance of the name that provided the one black mark on the big four this year,'' said Kirby Daley, a strategist at Societe Generale Securities' Fimat division in Tokyo. ///www.bloomberg.com