Bloomberg News

Asian Stocks Drop on Signs Global Economic Recovery Is Slowing

June 09, 2011

June 9 (Bloomberg) -- Asian stocks fell, dragging the regional benchmark index to its lowest level in two weeks, after the Federal Reserve said the U.S. economy is slowing in some regions, adding to signs the global recovery is weakening.

Li & Fung Ltd., the world’s biggest supplier of toys to retailers, fell 1.8 percent in Hong Kong. Samsung Electronics Co., the world’s largest maker of televisions and flat-screens by sales, slid 1.4 percent in Seoul. Tokyo Electric Power Co. sank 4 percent after power outages at its crippled Fukushima Dai-Ichi nuclear plant hampered efforts to stop radiation leaks. Nintendo Co., the maker of Wii video-game consoles, slumped 4.6 percent after UBS AG lowered its rating to “neutral.”

The MSCI Asia Pacific Index fell 0.4 percent to 132.59 as of 7:16 p.m. in Tokyo, heading for its lowest close since May 25. More than five stocks dropped for every four that rose in the gauge. Some $364 billion has been erased from the market value of the measure since this year’s peak on May 2, amid disappointing economic data, capped by a jobs report last week that showed U.S. companies hired fewer workers than estimated.

“The U.S. economy has so far been bolstered by manufacturers, as consumption, employment and housing were not good. But people have begun to see a dark cloud over the manufacturing industry,” said Mitsushige Akino, who oversees the equivalent of $600 million in Tokyo at Ichiyoshi Investment Management Co.

Monetary Tightening

Japan’s Nikkei 225 Stock Average rose 0.2 percent. The nation’s economy shrank at an annualized 3.5 percent rate last quarter after a magnitude-9 earthquake and tsunami on March 11 disrupted factory production, the Cabinet Office said today in Tokyo. The decline was less than a preliminary estimate that gross domestic product shrank 3.7 percent in the period. Economists surveyed by Bloomberg News expected 3 percent.

South Korea’s Kospi Index slid 0.6 percent. Hong Kong’s Hang Seng Index dropped 0.2 percent and China’s Shanghai Composite Index dropped 1.7 percent amid concern China’s central bank will continue tightening monetary policy even as the global recovery falters. A government report due next week is expected to show the country’s inflation accelerated in May.

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. In New York yesterday, the index fell 0.4 percent, sending the gauge to its longest losing streak since February 2009, as raw-material and financial shares slumped amid growing concern the economy is slowing.

Losing Streak

The Federal Reserve yesterday said the economy expanded at a “steady pace” in most of the U.S., while it weakened in four of 12 regions where consumers are contending with higher food and fuel prices and shortages of auto parts after Japan’s March disaster disrupted factory output.

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.

Li & Fung declined 1.8 percent to HK$16.52 in Hong Kong. Japanese carmaker Mazda Motor Corp. dropped 2.1 percent to 190 yen. Hyundai Motor Co., South Korea’s biggest automaker by market value, sank 2.2 percent to 226,500 won in Seoul. Samsung Electronics, which gets about 22 percent of sales from America, slid 1.4 percent to 865,000 won.

Nintendo Doubts

Tokyo Electric sank 4 percent to 192 yen, its lowest close since at least 1974. The No. 1 and No. 2 reactors at the utility’s Fukushima Dai-Ichi plant suffered electricity outages yesterday, hindering work to bring radiation leaks under control. Power was partly restored today, according to the company. The said power was restored.

Nintendo slumped 4.6 percent to 16,160 yen, extending yesterday’s decline. UBS AG cut its rating on the stock to “neutral” from “buy,” saying it will be difficult to lure customers to its new Wii model amid competition from smartphones and other gadgets.

Newcrest Mining Ltd., Australia’s No. gold producer, declined 0.7 percent to A$37.40 in Sydney. The company cut its full-year gold output forecast for the third time this year after a power failure interrupted production at its Lihir Island mine in Papua New Guinea.

Chinese Developers

The Asia-Pacific gauge slid 3.3 percent this year through yesterday, compared with a gain of 1.7 percent by the S&P 500 and a drop of 2.5 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.4 times estimated earnings on average, compared with 12.9 times for the S&P 500 and 10.9 times for the Stoxx 600.

Chinese real estate companies dropped after the nation’s money-market rate rose to the highest level this month on speculation the central bank will lift interest rates to help tame inflation. China’s consumer prices are forecast to rise 5.5 percent in May from a year earlier, the fastest pace since July 2008, according to the median estimate of economists surveyed by Bloomberg News.

China Vanke Co., the nation’s biggest developer by market value, sank 2.5 percent to 7.90 yuan in Shenzhen. Smaller rival Poly Real Estate Group retreated 2.5 percent to 9.30 yuan in Shanghai.

“The government is likely to increase interest rates again this year to cool inflation despite economic growth concerns,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

--With assistance from Norie Kuboyama in Tokyo. Editors: John McCluskey, Jason Clenfield.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net. Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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


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