Bloomberg News

Asian Stocks Slump as Europe Crisis Deepens Amid Greek Rioting

June 16, 2011

June 16 (Bloomberg) -- Asian stocks tumbled, with the region’s key benchmark index on course for its longest string of weekly losses in seven years, as rioting against planned austerity measures threatened Greece’s government and the global economic recovery.

Li & Fung Ltd., the world’s biggest supplier of toys to retailers including Wal-Mart Stores Inc. and Target Corp., dropped 3 percent in Hong Kong as concern mounted that Greece will default on its debt. BHP Billiton Ltd., the world’s No. 1 mining company by sales, sank 2.1 percent in Sydney as oil and metal prices tumbled yesterday. Toyota Motor Corp., the largest carmaker, declined 1.7 percent in Tokyo as reports showed the U.S. economy is cooling. Samsung Electronics Co., which gets most of its revenue overseas, lost 2 percent in Seoul.

The MSCI Asia Pacific Index sank 2.1 percent to 129.82 as of 7:51 p.m. in Tokyo, headed for its lowest close since March 18, amid concern a recovery from the 2008 financial crisis and subsequent global recession may be derailed.

“Investors still get nightmares from the events of 2008 and nobody wants to see an encore,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management Ltd. in Sydney. “Europe has the potential to set off another global credit crisis, which is the biggest worry.”

Losing Streak

The MSCI Asia Pacific index is headed toward its seventh straight weekly loss, exceeding a six-week streak of declines in the aftermath of the collapse of Lehman Brothers Holdings Inc. in 2008. About seven times as many stocks retreated as advanced on the gauge today and all 10 industry groups declined, led by material and technology shares.

Japan’s Nikkei 225 Stock Average slipped 1.7 percent. South Korea’s Kospi Index and Australia’s S&P/ASX 200 Index both declined 1.9 percent.

Hong Kong’s Hang Seng Index dropped 1.8 percent and China’s Shanghai Stock Exchange Composite Index slid 1.5 percent amid renewed speculation that China is poised to raise interest rates.

India’s Sensitive Index lost 0.8 percent after the nation’s central bank raised interest rates for the 10th time since the start of 2010, extending the longest streak of monetary tightening in a decade as inflation accelerated.

Futures on the Standard & Poor’s 500 Index were little changed today. In New York, the index slumped 1.7 percent yesterday on concern Europe’s debt crisis is worsening while the U.S. economic recovery slows.

“It’s another riot point in markets with the EU debt crisis intensifying and growth losing significant momentum,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which has almost $100 billion under management. “It looks like there’s still more downside in markets.”

Tear Gas

European officials have so far failed to agree on a rescue plan for debt-ridden Greece. Prime Minister George Papandreou will name a new Greek government and call a vote of confidence in parliament as he seeks to pressure opposition lawmakers to back an austerity plan aimed at securing a new bailout.

Papandreou sought to reassert his authority in a televised address last night hours after police used tear gas to break up protests in central Athens and media reported that he was in talks to step down in favor of a unity government. A crowd of 8,000 protestors remained outside Parliament late into the evening, according to police.

The European Central Bank said yesterday the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region’s financial stability.

“Greece could have a contagion effect,” ECB Vice President Vitor Constancio said at a briefing in Frankfurt yesterday, when presenting the bank’s semi-annual Financial Stability Review.

Li & Fung

Li & Fung fell 3 percent to HK$14.76 in Hong Kong. The stock, which is the worst performer in the Hang Seng Index this year, is set for its longest streak of daily losses since at least 1992, according to data compiled by Bloomberg

“Li & Fung is a proxy company for export to the U.S.,” said Masahiko Ejiri, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees $41 billion, including shares in Hong Kong-listed companies. “When people are concerned about its economy, they tend to sell the shares. That might be one of the factor company is under pressure.”

Cosco Pacific Ltd., the Hong Kong-based operator of container facilities in Greece, dropped 1.2 percent to HK$13.48. Mazda Corp., the Japanese carmaker that gets 18 percent of sales from Europe, slid 2.5 percent to 192 yen in Tokyo.

BHP Billiton sank 2.1 percent to A$42 in Sydney. Rio Tinto Group, the world’s second-largest mining company by sales, slid 2.1 percent to A$78.40. Jiangxi Copper Co., China’s No. 1 producer of the metal, dropped 3 percent to HK$24.65 in Hong Kong. Inpex Corp., Japan’s biggest energy explorer, decreased 3.8 percent to 565,000 yen in Tokyo.

‘Cannot be Optimistic’

Crude oil for July delivery tumbled 4.6 percent to $94.81 a barrel in New York yesterday, while the London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 0.8 percent.

“The Greek issues are dragging on and we cannot be optimistic,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co.

In the U.S., a report showed manufacturing in the New York region unexpectedly shrank in June, a sign the industry still faces parts shortages following the March earthquake and tsunami in Japan. Another report showed confidence among U.S. homebuilders slumped in June to the lowest level in nine months as executives turned more pessimistic on the outlook for sales.

‘Wall Of Worry’

Toyota declined 1.7 percent to 3,195 yen in Tokyo. Samsung Electronics slid 2 percent to 848,000 won in Seoul. LG Electronics Inc., the world’s third-biggest maker of mobile phones by sales, dropped 2.2 percent to 81,200 won.

HTC Corp., the Taiwanese smartphone maker that get about half of sales from America, tumbled 6.8 percent to NT$997 in Taipei after UBS AG removed it from its list of preferred technology stocks.

“There’s really a wall of worry out there at the moment,” said Matt Riordan, who helps manage about $7 billion in Sydney at Paradice Investment Management Pty. “It’s hard to build an optimistic story. The one ray of hope may be the extent to which this is a lull that’s been caused by temporary issues.”

Federal Reserve figures showed industrial production in the U.S. rose less than forecast in May. The cost of living in the world’s biggest economy increased more than forecast last month, reflecting higher prices for everything from autos to hotel rooms, another report showed.

China Tightening

The MSCI Asia Pacific Index lost 3.7 percent this year through yesterday, compared with a gain of 0.6 percent by the S&P 500 and a drop of 2.9 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.4 times estimated earnings on average, compared with 12.7 times for the S&P 500 and 10.8 times for the Stoxx 600.

Guangzhou R&F Properties Co., the biggest developer in the Southern Chinese city, slumped 3.9 percent to HK$9.65. Belle International Holdings Ltd., China’s largest retailer of women’s shoes by market value, dropped 2.1 percent to HK$14.88 in Hong Kong. Fanuc Corp., an industrial robot maker that gets about 50 percent of its sales in Asia, fell 2.3 percent to 12,250 yen in Tokyo.

An interest-rate increase in China isn’t “far away” because not doing so would cause more harm to the economy, the Economic Information Daily said in a front-page editorial.

An increase in bank reserve-requirements earlier this week didn’t negate the need for an interest-rate increase, the most “powerful weapon” to contain inflation, according to the newspaper, which is run by the government’s Xinhua News Agency.

Lotte Shopping Co., South Korea’s biggest department-store owner by market value, plunged 7.2 percent to 487,0000 won in Seoul. The company plans to sell the equivalent of about $401 million in yen convertible bonds due July 2016, after exercising an option that raised the offer from about $200 million, according to a term sheet.

--With assistance from Akiko Ikeda, Kana Nishizawa and Satoshi Kawano in Tokyo and Jonathan Burgos in Singapore. Editors: John McCluskey, Jason Clenfield.

To contact the reporters 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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