Bloomberg News

Asian Stocks Drop, Equaling Six-Week Fall After Lehman Collapse

June 10, 2011

June 11 (Bloomberg) -- Asian stocks dropped, matching the six-week losing streak in the aftermath of the collapse of Lehman Brothers Holdings Inc. in 2008, amid concern a slowing U.S. economic recovery will stifle global growth.

Li & Fung Ltd., the world’s biggest supplier of toys to retailers, tumbled 9.5 percent in Hong Kong. Hyundai Motor Co., South Korea’s biggest automaker, slumped 7.7 percent in Seoul. Nintendo Co. lost 10 percent in Tokyo after UBS AG lowered its investment rating. Tokyo Electric Power Co. sank 34 percent after the Tokyo Stock Exchange’s president was quoted saying the operator of the crippled Fukushima Dai-Ichi nuclear plant should be put under bankruptcy protection.

The MSCI Asia-Pacific Index declined 1.4 percent to 132.08 this week after the U.S. jobless rate unexpectedly climbed and Federal Reserve Chairman Ben S. Bernanke gave no hint of a new round of economic stimulus even as the nation’s recovery slows. The gauge fell 0.3 percent last week as reports showed U.S. manufacturing expanded at the weakest pace in more than a year and employers hired fewer workers than forecast.

“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.”

Australia’s S&P/ASX 200 Index slipped 0.5 percent this week. South Korea’s Kospi index slumped 3.2 percent, while Hong Kong’s Hang Seng index fell 2.3 percent. Japan’s Nikkei 225 Stock Average gained 0.2 percent.

Financial Crisis

The decline over the past five days completes the Asia- Pacific gauge’s biggest run of weekly losses since dropping for six straight weeks beginning September 2008, the month that Lehman Brothers’ bankruptcy helped spark a global financial crisis.

The streak of weekly declines has also been driven by reports showing that manufacturing growth in China, the U.S. and Europe slowed in May, and amid speculation that accelerating inflation may prompt Chinese authorities to raise interest rates.

Concern that global growth is poised to slow led Li & Fung to a 9.5 percent slide this week to HK$16.02 in Hong Kong, while Japanese carmaker Mazda Motor Corp. retreated 2.5 percent to 194 yen. Hyundai Motor Co., South Korea’s biggest automaker by market value, sank 7.7 percent to 223,000 won in Seoul. Samsung Electronics Co., which gets about 22 percent of sales from America, slid 3.8 percent to 851,000 won.

U.S. Economy

Government reports showed that the U.S. jobless rate unexpectedly climbed to 9.1 percent in May, the highest level this year, while payrolls grew at the slowest pace in eight months, signaling employers are losing confidence as the economy slows. The string of disappointing economic data is raising doubts about the durability of a U.S. recovery and concern over its possible global impact.

“The U.S. job situation is deteriorating,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “The slowdown in the U.S. economy shows that there’s a lack of liquidity in the market.”

The Fed Chairman said on June 7 that the central bank should maintain record monetary stimulus to boost an “uneven” and “frustratingly slow” recovery. The recent data showing weakness in the U.S. economy has raised the odds that the Fed will hold the benchmark interest rate near zero into next year.

‘Monetary Easing’

The Federal Reserve also said this week that the economy expanded at a “steady pace” in most of the U.S., while weakening in four of 12 regions where consumers are contending with higher food and fuel prices, and shortages of auto parts after Japan’s March 11 earthquake disrupted factory output.

“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.”

In Tokyo, Nintendo, the maker of Wii video-game consoles, slumped 10 percent to 16,310 yen. 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. 1 gold producer, declined 3.1 percent to A$37.45 in Sydney after the company cut its full-year gold output forecast for the third time this year following a power failure that interrupted production at its Lihir Island mine in Papua New Guinea.

Tokyo Electric

Tokyo Electric slumped 34 percent to 190 yen in Tokyo after the Asahi Shimbun newspaper quoted TSE President Atsushi Saito as saying the company needs to be restructured and follow the same route as Japan Airlines Co., which filed for bankruptcy protection in 2010. Japan’s Chief Cabinet Secretary Yukio Edano later said that liquidating the utility would cause huge problems and must be avoided.

A separate report by the Tokyo Shimbun said Tepco will post a full-year net loss of 570 billion yen ($7.1 billion). Tepco, as the utility is called, said it wasn’t the source of the story.

Tepco also fell after the Nikkei newspaper reported that 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.

Kansai Electric Power Co. dropped 11 percent to 1,180 yen and Chubu Electric Power Co. slid 7.3 percent to 1,149 yen.

Greenheart Group Ltd., a unit of timber producer Sino- Forest Corp., tumbled 44 percent to HK$1.57 in Hong Kong as regulators and investors increased scrutiny of Chinese companies traded overseas amid allegations of fraud.

Greenheart’s parent asked Canadian regulators to probe short selling by Muddy Waters Research, founded by short seller Carson Block, after the company released a report saying that Hong Kong- and Mississauga, Ontario-based Sino-Forest’s disclosed land holdings didn’t match Chinese city records.

--With assistance from Toshiro Hasegawa in Tokyo and Jonathan Burgos in Singapore. Editors: Nick Gentle, Paul Tighe

To contact the reporter on this story: 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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