Bloomberg News

Asian Stocks Drop a Second Day on Signs U.S. Economy Faltering

June 03, 2011

June 3 (Bloomberg) -- Asian stocks fell for a second day, driving the regional benchmark index to its longest string of weekly losses since the collapse of Lehman Brothers Holdings Inc., amid signs economic recovery in the U.S. is faltering.

Toyota Motor Corp., the world’s biggest automaker that gets 28 percent of sales from North America, lost 1.2 percent in Tokyo. LG Electronics Inc., a South Korean electronics maker, dropped 1.2 percent after saying there won’t be a turnaround for its mobile-phone business in the second quarter. Hang Lung Properties Ltd. led Hong Kong developers lower after home sales in the city dropped for a fifth month in May.

“We could see a little bit more consolidation before equities go back up,” Michael Preiss, Singapore-based chief equities strategist at Standard Chartered Bank, said in a Bloomberg Television interview. “The second half slowdown that we see is potentially becoming worse than economists had forecast.”

The MSCI Asia Pacific Index fell 0.5 percent to 133.88 as of 7:09 p.m. in Tokyo, heading for a 0.4 percent drop this week. The five-week slump is the gauge’s longest losing streak since October 2008, after the bankruptcy of Lehman Brothers triggered a global stocks rout. Almost two stocks fell for each that rose on the measure, which swung between gains and losses at least eight times.

Japan Politics

Japan’s Nikkei 225 Stock Average decreased 0.7 percent, erasing an earlier advance of as much as 0.5 percent. Prime Minister Naoto Kan’s pledge yesterday to step down sparked a contest to select the nation’s next leader, adding to the risk of delays in reconstruction after the March earthquake and approval of plans to boost taxes and shrink the deficit needed to restore growth and assuage credit concerns. Kan yesterday survived a no-confidence vote in parliament.

Australia’s S&P/ASX 200 Index fell 0.4 percent. Hong Kong’s Hang Seng Index sank 1.3 percent. China’s Shanghai Composite Index rose 0.8 percent. Taiwan’s Taiex Index added 0.6 percent.

Stocks have fallen this week as reports showed manufacturing growth from China, the U.S. and Europe slowed in May, adding to signs that momentum is weakening in a global economy facing headwinds from rising commodity costs and financial shocks. Greece’s risk of default was raised to 50 percent by Moody’s Investors Service as European officials rushed to put together the second bailout plan in two years to stave off renewed financial turmoil in the region.

Low Expectations

“These have all impacted sentiment extensively,” Adrian Foster, head of financial-market research for Asia at Rabobank Groep NV in Hong Kong, said on Bloomberg television. “There’s no strong incentive to solve Greece’s debt problems. Data from the U.S. had conspired to pull expectations quite significantly lower.”

Futures on the Standard & Poor’s 500 Index dropped 0.3 percent today. In New York, the index retreated 0.1 percent yesterday, falling for a second day, ahead of a monthly report on employment by the U.S. Labor Department.

More Americans than forecast filed applications for unemployment benefits last week, a government report showed yesterday. Monthly payrolls data due today may show employers added 165,000 jobs in May, following a 244,000 increase in April, economists forecast. Economists predicted a gain of 185,000 before yesterday’s ADP Employer Services report showed companies added 38,000 jobs last month, less than a quarter of the median estimate in a survey of economists.

‘Poor Data’

“Investors are going to be on hold today, waiting for the jobs report,” said Juichi Wako, a senior strategist at Tokyo- based Nomura Holdings Inc. “We’ve had some poor data out of the U.S. lately, and employment numbers to be released today will help settle some questions.”

Toyota slipped 1.2 percent to 3,230 yen in Tokyo. Yue Yuen Industrial Holding Ltd., a maker of shoes for Nike Inc. that counts the U.S. as its biggest market, sank 2.2 percent to HK$26.40 in Hong Kong. Foxconn International Holdings Ltd., the world’s largest contract maker of mobile phones, dropped 2.2 percent to HK$3.99 in Hong Kong.

LG Electronics, the world’s No. 3 mobile phone maker, declined 1.2 percent to 93,100 won in Seoul. The company’s mobile-phone business won’t turn to a profit in the second quarter, while its television unit is hurting from high inventory, chief executive officer Koo Bon Joon told reporters yesterday.

Real Estate

Developers in Hong Kong fell after home-sale transactions in the city declined for a fifth straight month in May as rising mortgage rates continue to dent buying sentiment. The number of units that changed hands last month declined 12 percent from a year earlier to 9,681, the Land Registry said yesterday. The value of transactions rose 15 percent from a year earlier to HK$49.5 billion ($6.4 billion), according to a statement on the government body’s website.

Hang Lung, Hong Kong’s fifth-biggest developer by sales, declined 2.6 percent to HK$31.55. Sun Hung Kai Properties Ltd., the world’s largest real estate company by market value, decreased 2 percent to HK$116.80. Cheung Kong (Holdings) Ltd., owned by Hong Kong billionaire Li Ka-shing, dropped 2 percent to HK$116.80.

Among stocks that advanced, Foster’s Group Ltd. surged 3.5 percent to A$4.43 in Sydney, its biggest advance since Jan 24. Grupo Modelo SAB de CV, the Mexican brewer of Corona beer, and Molson Coors Brewing Co. are exploring a possible joint bid for Australia’s biggest brewer, said five people with knowledge of the situation.

Macau Casino

PCCW Ltd., Hong Kong’s largest phone company, jumped 4.4 percent to HK$3.10 after winning approval from the city’s stock exchange to list its telecommunications operations as a business trust.

MGM China Holdings Ltd., the Macau venture between Pansy Ho and the biggest casino operator on the Las Vegas Strip, rose 1.8 percent to HK$15.62 on its first day of trading in Hong Kong. The company raised $1.5 billion in its initial share sale.

The MSCI Asia Pacific Index slid 2.3 percent this year through yesterday, compared with gains of 4.4 percent by the S&P 500 and 0.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.3 times estimated earnings on average, compared with 13.2 times for the S&P 500 and 11.1 times for the Stoxx 600.

--With assistance from Norie Kuboyama, Satoshi Kawano and Kana Nishizawa in Tokyo and Shani Raja in Sydney. Editors: John McCluskey, Jason Clenfield.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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