Bloomberg News

Asian Stocks Cap Biggest Weekly Losing Streak in Seven Years

June 17, 2011

June 17 (Bloomberg) -- Asian stocks fell, capping a benchmark index’s longest weekly losing streak since 2004, amid concern that Greece may default on its sovereign debt and potentially derail a global economic recovery.

Esprit Holdings Ltd., a global fashion retailer that gets most of its revenue from Europe, slid 4.1 percent in Hong Kong. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, sank 3.8 percent. Samsung Electronics Co. slumped 3.4 percent in Seoul after Research In Motion Ltd., which makes BlackBerry phones, said quarterly revenue may drop.

The MSCI Asia Pacific Index dropped 0.4 percent to 129.30 as of 7:02 p.m. in Tokyo, after earlier gaining as much as 0.3 percent. The gauge has lost 2.1 percent this week.

With the Greece situation, “the biggest fear is the unknown,” said Tim Schroeders, who helps manage about $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “What are the consequences for other highly indebted European Union constituents, what write-downs will European banks be forced to incur, and what will be the consequence of that? The ripple effects of a default are numerous.”

The Asia-Pacific gauge rounded out its seventh straight weekly decline amid concern that a recovery from the global recession may be derailed by Europe’s sovereign debt crisis and China’s steps to control inflation. That exceeds the six-week streak that occurred in the aftermath of the collapse of Lehman Brothers Holdings Inc. in 2008.

‘Contagion And ‘Fear’

About three stocks dropped on the gauge for each that advanced. Japan’s Nikkei 225 Stock Average lost 0.6 percent. South Korea’s Kospi Index fell 0.7 percent, while Hong Kong’s Hang Seng Index retreated 1.2 percent. Australia’s S&P/ASX 200 Index closed 0.1 percent higher, having risen as much as 1 percent earlier in the day.

“Contagion is the big fear,” said Jason Teh, a Sydney- based fund manager who helps manage about $3 billion at Investors Mutual Ltd. “The stock market is pricing in some of that fear.”

Futures on the Standard & Poor’s 500 Index rose 0.4 percent today. In New York yesterday, the index added 0.2 percent after fewer people than expected filed claims for unemployment benefits and housing starts exceeded forecasts.

Esprit slid 4.1 percent to HK$25.65 in Hong Kong amid concern Europe’s debt crisis won’t be resolved as leaders meet today to discuss a rescue for Greece.

Default Chances

Woodside sank 3.8 percent to A$40.80 in Sydney as crude oil in New York dropped as much as 0.8 percent today. Woodside also fell after saying it expects its Pluto liquefied natural gas project to cost 6.4 percent more and start about six months later than previously estimated.

In Seoul, Hanjin Shipping Co., South Korea’s largest shipping company, slumped 5 percent to 21,650 won.

German Chancellor Angela Merkel and French President Nicolas Sarkozy will discuss a package for Greece, where a default is “almost certain” and could help drive the U.S. economy into recession, according to Alan Greenspan, former Federal Reserve chairman.

Prime Minister George Papandreou called on his allies in parliament to back austerity measures needed to qualify for international aid and avoid a sovereign-debt default.

“The problem you have is that it’s extremely unlikely the political system will work” in a way that solves Greece’s crisis, Greenspan, 85, said in an interview with Charlie Rose in New York. “The chances of Greece not defaulting are very small.”

‘Hard Haircut’

Separately, European Union Economic and Monetary Commissioner Olli Rehn said he is “confident” Greece will receive the next tranche of aid in early July, saying he has received assurances from the International Monetary Fund.

A “hard haircut” for investors in Greek securities would risk contagion to other European countries and have unpredictable knock-on effects, Jean-Claude Juncker, head of the euro-region finance ministers group, was cited as saying in an interview with newspaper Tagesspiegel.

“There are several ugly scenarios that could ensue from a Greek default,” said Angus Gluskie, who manages about $350 million at White Funds Management Pty. in Sydney.

“European banks would face solvency pressure, and governments would potentially be forced to fund bank or other sovereign bailouts. That would tighten credit access and raise flow-on solvency fears around the world. Because of this, I think EU members will ultimately agree on a less risky course of action.”

Tech slide

Technology stocks slid the most among 10 industry groups on the Asia-Pacific gauge today after Research In Motion, whose BlackBerry phones are losing sales to Apple Inc.’s iPhone, said quarterly revenue may drop for the first time in nine years. Samsung slumped 3.4 percent to 819,000 won in Seoul.

Hynix Semiconductor Inc. dropped 6.1 percent to 24,650 won in Seoul after Korea Investment & Securities Co. cut its share- price estimate, saying the company’s second-quarter earnings will fall short of expectations.

The MSCI Asia Pacific Index lost 5.7 percent this year through yesterday, compared with a gain of 0.8 percent by the S&P 500 and a drop of 3.3 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.2 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.7 times for the Stoxx 600.

Billabong International Ltd., which gets almost half its revenue from the Americas, gained 1.3 percent to A$6.19 in Sydney after the U.S. economic reports, which indicated the world’s biggest economy may still be recovering. James Hardie Industries SE, the largest seller of home siding in the U.S., gained 1.1 percent to A$5.41.

--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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