Resource stocks hit by commodity price pullback

Mar.19, 2008 in Market Outlook

By V. Phani Kumar, MarketWatch

Last Update: 10:44 PM ET Mar 19, 2008

HONG KONG (MarketWatch) — Asian markets reversed gains Thursday, hit by a sharp
pullback in commodity prices that dragged down shares of resource issues such as
BHP Billiton in Sydney, Zhongjin Gold Co. in Shanghai and Korea Zinc Co. in
Seoul.

“The weakness right across resources stocks, which up until now had shown some
resilience to significant market declines across the world, just further
highlights the fact that we’re seeing funds liquidating out of the resource
stocks,” said Jamie Spiteri, head of trading at Shaw Stockbroking in Sydney.

In China, the benchmark Shanghai Composite, which tracks both the
yuan-denominated A shares and foreign currency-denominated B shares, tumbled 3.5%
to 3,629.39. In Shenzhen, the Shenzhen Composite sank 3.8% to 1,077.13.

The retreat, one day after the Shanghai Composite snapped a five-session losing
streak, spread weakness across Hong Kong as well, where the Hang Seng China
Enterprises Index tumbled 5.5% to 10,801.28. The benchmark Hang Seng Index lost
3.7% to 21,053.42.

Australia’s S&P/ASX 200 sank 2.7% to 5,147.20, after rising as much as 4% in the
previous session.

Stock markets in Japan, India, Indonesia, Malaysia, Pakistan and Philippines are
closed for a holiday Thursday.

“The short-term uncertainty continues to worry investors and in particular many
are concerned equities will continue to perform inconsistently,” said Spiteri.

Elsewhere in the region, Singapore’s Straits Times Index dropped 1.6% to
2,786.89, Taiwan’s Weighted index inched up 0.1% to 8,190.82, New Zealand’s NZX
50 index gave up 0.4% to 3,454.22 and South Korea’s Kospi shed 1.4% to 1,599.53.

Resources hit hard

The decline in resource stocks came on the U.S. Federal Reserve’s call against
inflation, which triggered a steep correction in commodities including crude oil
and gold.

Shares of BHP (BHP)(AU:BHP) slumped 8.4%, Rio Tinto (RTP)(AU:RIO) lost 7.2% and
Woodside (AU:WPL)(WOPEY) gave up 7.2% in Sydney. In Seoul trading, shares of
Korea Zinc Co. dropped 3.6% in Seoul trading and in Shanghai, gold miners
Zhongjin Gold Co. and Shandong Gold Mining Co. both dropped by their daily limits
of 10%.

April gold futures, which plunged $59, or 5.9%, to $945.30 an ounce on the Nymex
overnight, fell as low as $915 in electronic trading. The contract was recently
down $13.3 at $932 an ounce.

May crude-oil futures slipped 54 cents to $102 a barrel in electronic trading,
after sinking $5.96 to $102.54 a barrel on the New York Mercantile Exchange.
April futures, which expired Wednesday, dropped $4.94 to $104.48 a barrel.

The pullback marked the worst one-day drop in nearly two years for gold and the
biggest daily loss for crude oil since early 1991.

On Wall Street, the Dow Jones Industrial Average ($INDU) lost 293 points to
settle at 12,099.66, the S&P 500 index ($SPX) fell 32.32 points to 1,298.42 and
the Nasdaq Composite ($COMPX) slid 58.3 points to 2,209.96.

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