Bloomberg News

Asian Stocks Swing Between Gains, Losses Amid Europe Deadlock

June 15, 2011

June 15 (Bloomberg) -- Asian stocks swung between gains and losses as a better-than-estimated U.S. retail sales report countered speculation that Europe’s sovereign debt crisis will take longer to resolve.

Honda Motor Co., a carmaker that gets about 84 percent of sales outside Japan, climbed 2 percent after a report showed U.S. retail sales were better than forecast. Esprit Holdings Ltd., a global fashion retailer that gets most its revenue from Europe, slumped 5.1 percent in Hong Kong as European Union officials struggled to break a deadlock on a second Greek rescue plan. HSBC Holdings Plc, Europe’s biggest bank, sank 1.3 percent.

The MSCI Asia Pacific Index fell 0.2 percent to 132.57 as of 7:27 p.m. in Tokyo after rising as much as 0.2 percent and falling 0.4 percent. About the same number of stocks advanced as fell on the gauge.

“Investors were pleased to see U.S. retail sales beat expectations, despite still being negative,” said Tim Schroeders, who helps manage about $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “A lack of resolution of Greece’s debt situation adds to investor uncertainty not only for Greece, but other highly indebted nations within the European Union.”

The Asia-Pacific index climbed 1 percent yesterday after China released reports showing industrial output grew more than economists forecast and that inflation accelerated at the fastest pace in almost three years. The gauge pared advances late yesterday after Chinese authorities ordered lenders to set aside more cash as reserves.

Japan’s Nikkei 225 Stock Average gained 0.3 percent today. South Korea’s Kospi Index advanced 0.5 percent, while Australia’s S&P/ASX 200 Index declined 0.4 percent. Hong Kong’s Hang Seng Index fell 0.7 percent.

Retail Sales

Futures on the Standard & Poor’s 500 Index slipped 0.4 percent today. In New York, the index gained 1.3 percent yesterday, the most since April 20, after better-than-estimated data on American retail sales and Chinese industrial production.

The Commerce Department in Washington yesterday reported sales at retailers fell 0.2 percent in May, less than forecast, indicating American consumers are weathering higher gasoline costs. The median forecast of economists surveyed by Bloomberg News was for a drop of 0.5 percent. Another report showed U.S. wholesale costs rose last month.

Also boosting the global economic recovery, China reported yesterday that its industrial production rose 13.3 percent last month compared with a 13.1 percent forecast.

Japanese Exporters

Honda rose 2 percent to 2,990 yen in Tokyo. Toyota Motor Corp., the world’s biggest carmaker by revenue, gained 0.6 percent to 3,250 yen. Hino Motors Ltd., a maker of trucks and buses, gained 4.4 percent to 453 yen after saying it will post a 12 billion yen ($149 million) net profit this fiscal year, compared with a loss of 10 billion yen last year.

In Sydney, Billabong International Ltd., a surfwear maker that gets almost half its revenue from the Americas, advanced 1.1 percent to A$6.22.

“Excessive concern about the future of the U.S. economy will recede because retail sales, the most important data showing U.S. personal spending, weren’t as bad as the market expected,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “Investors will likely buy companies sensitive to the global economy.”

Tokyo Electric Power Co., the utility at the center of the worst nuclear crisis in 25 years, surged 32 percent, extending a 25 percent advance yesterday, as investors bought shares to cover a record number of short-sale positions.

‘Pure Short-Covering’

Gains over the past two days are “pure short-covering,” said Amir Anvarzadeh, a sales manager at BGC Partners Inc.’s Asian equity sales team in Singapore. “We see these types of rebounds because of the massive falls. Tepco trades have become speculative trades for hedge funds, short-term trades, short- covering.”

The MSCI Asia Pacific Index fell 3.5 percent this year through yesterday, compared with a gain of 2.4 percent by the S&P 500 and a drop of 1.8 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.5 times estimated earnings on average, compared with 13 times for the S&P 500 and 10.9 times for the Stoxx 600.

Among stocks that fell today, Esprit slumped 5.1 percent to HK$26.30 in Hong Kong, headed for its lowest close since 2004, and HSBC sank 1.3 percent to HK$78.05.

An emergency session of finance ministers in Brussels late yesterday failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new Greek aid package with European Central Bank warnings that the move might constitute the euro area’s first sovereign default.

‘Unprecedented’ Claims

QBE Insurance Group Ltd., Australia’s largest insurer by market value, dropped 3.7 percent to A$16.65 in Sydney as it forecast a narrower insurance margin after “unprecedented” claims from catastrophes. After-tax profit for the six months ending June 30 will be 50 percent to 60 percent higher than a year earlier, Sydney-based QBE said in a statement late yesterday.

“Elevated catastrophe claims mean that QBE’s first half insurance margin will likely be at its lowest level in seven years,” said Sydney-based analysts at Royal Bank of Scotland Group Plc including Richard Coles in a note to investors. “It would now appear quite a stretch for QBE to achieve the bottom end of its full-year guidance, despite putting through substantial price increases in catastrophe affected portfolios.”

HTC Corp. fell 7 percent to NT$1,070 in Taipei after the smartphone maker was cut to “neutral” from “outperform” at Macquarie Group Ltd., which cited the prospects of competition for makers of handsets using Google Inc.’s Android system as low-cost rivals gain market share.

----With assistance from Norie Kuboyama and Satoshi Kawano in Tokyo. Editor: Jason Clenfield, Nick Gentle.

To contact the reporters on this story: Shani Raja in Sydney at

To contact the editor responsible for this story: Nick Gentle at

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