Bloomberg News

Asian Stocks Decline as Bernanke Fuels Global-Growth Concerns

June 08, 2011

June 8 (Bloomberg) -- Asian stocks dropped, dragging the regional benchmark index to its lowest level in two weeks, as U.S. Federal Reserve officials fueled concern about the sustainability of the global recovery.

Honda Motor Co., the Japanese carmaker that gets 44 percent of sales from North America dropped 1.3 percent in Tokyo. Hyundai Motor Co., South Korea’s biggest automaker, fell 2.7 percent in Seoul. Tokyo Electric Power Co., owner of the crippled Fukushima Dai-Ichi nuclear power station, slumped 7.4 percent after the Nikkei newspaper reported all of Japan’s nuclear reactors may be idled.

Federal Reserve chairman Ben S. “Bernanke’s somber outlook combined with no hint of further quantitative easing being used as a policy response near-term have led to a negative tone in markets,” said Tim Schroeders, who helps manage about $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “In a glass-half-empty environment, investors globally are adopting a much more cautious stance.”

The MSCI Asia Pacific Index fell 0.4 percent to 133.16 as of 7:39 p.m. in Tokyo, erasing gains of as much as 0.2 percent and heading for its lowest close since May 25. Almost two stocks dropped for each that rose in the gauge. Some $309 billion has been erased from the market value of the measure since the year’s peak on May 2, amid disappointing economic data, capped by last week’s U.S. jobs report that showed American companies hired fewer workers than economists forecast.

‘Frustratingly Slow’

Australia’s S&P/ASX 200 Index lost 0.7 percent. South Korea’s Kospi Index retreated 0.8 percent. Hong Kong’s Hang Seng Index dropped 0.9 percent. China’s Shanghai Composite Index added 0.2 percent. New Zealand’s NZX 50 Index gained 0.6 percent.

Japan’s Nikkei 225 Stock Average climbed 0.1 percent, erasing declines of as much as 0.5 percent, after the Economy Watchers current conditions index, a survey of barbers, taxi drivers and others who deal with consumers, rose to 36, the Cabinet Office said in Tokyo.

Futures on the Standard & Poor’s 500 Index fell 0.5 percent today. In New York yesterday, the index fell for a fifth day, the longest slump for almost a year, sliding 0.1 percent to its lowest level since March 18.

Bernanke said yesterday the central bank should maintain record monetary stimulus to boost an “uneven” and “frustratingly slow” economic recovery. Federal Reserve Bank of New York President William Dudley said the government must reduce the budget deficit without derailing the economy.

“Some people had expected further monetary easing, but Chairman Bernanke didn’t mention it,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “There are concerns about a slowdown in the global economy, including the U.S.”

Losing Streak

The MSCI Asia Pacific Index last week capped its longest streak of weekly losses since the aftermath of the collapse of Lehman Brothers Holdings Inc. in 2008 as reports showed manufacturing growth from China, the U.S. and Europe slowed in May, adding to signs the global economy is faltering. The Washington-based World Bank cut its world growth forecast to 3.2 percent from a January estimate of 3.3 percent as it lowered estimates for economic expansion in the biggest economy.

“The hot debate on whether global economic conditions are heading into a soft patch or double-dip will continue in the next few months, affecting investors’ sentiment,” said Kang Shin Woo, chief investment officer at Seoul-based Korea Investment Management Co., which oversees $17 billion. “No signs of solid recovery are seen in major economies.”

Honda, which counts North America as its main source of revenue, slipped 1.3 percent to 2,980 yen. Hyundai, which gets 13 percent of sales from North America, declined 2.7 percent to 231,500 won in Seoul. LG Electronics Inc., the world’s third- biggest maker of mobile phones, fell 2.7 percent to 90,800 won in Seoul.

‘High Expectations’

Nintendo Co., the world’s largest maker of video-game consoles, tumbled 5.7 percent to 16,930 yen in Tokyo after the unveiling at the Electronic Entertainment Expo in Los Angeles of its first high-definition video-game console prompted some analysts to question the company’s ability to repeat the success of its ageing Wii model.

“There were high expectations for the new version of the Wii and this fell far short,” Yusuke Tsunoda, an analyst at Tokai Tokyo Securities Co., said by phone today. “People had expected to see something more.”

The MSCI Asia Pacific gauge slid 2.9 percent this year through yesterday, compared with a gain of 2.2 percent by the S&P 500 and a drop of 1.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.5 times estimated earnings on average, compared with 12.9 times for the S&P 500 and 11 times for the Stoxx 600.

Tokyo Electric slumped 7.4 percent to 200 yen, its lowest close since at least 1974. All of Japan’s 54 nuclear reactors could be idled by next spring if those shut for scheduled maintenance don’t receive the required local approval to restart, the Nikkei newspaper reported.

Using fossil fuel would cost utilities 3 trillion yen annually ($37 billion), the newspaper said, citing an estimate presented by Japan’s trade and industry ministry.

‘Unclear Synergies’

Hyundai Heavy Industries Co., the world’s biggest shipyard operator, plunged 5.6 percent to 466,000 won in Seoul after saying it may consider bidding for a $2.4 billion stake in Hynix Semiconductor Inc. being sold by former creditors.

“It’s very hard to see why it would be interested,” said Lee Jae Won, an analyst at Tong Yang Securities Inc. “It’s really unclear what the synergies would be.”

A gauge of energy producers posted the second-biggest decline among the 10 industry groups in the MSCI Asia Pacific Index after crude oil for July delivery dropped as much as 0.7 percent, erasing earlier gains. All but two of measure’s sub- indexes decreased.

Woodside Petroleum Ltd., Australia’s second-biggest energy producer, sank 2.6 percent to A$43.88 in Sydney. Smaller rival Santos Ltd. fell 2 percent to A$13.76. PTT Pcl, Thailand’s largest oil company, dropped 2.4 percent to 331 baht in Bangkok.

--With assistance from Norie Kuboyama and Toshiro Hasegawa in Tokyo. Editors: Nick Gentle, John McCluskey.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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


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