Bloomberg News

Asian Financial Shares, Copper Fall; Euro Weakens Against Yen

July 05, 2011

July 6 (Bloomberg) -- Most Asian stocks declined, led by Chinese banks, after an investor sold $3.63 billion worth of shares in two lenders and amid concern credit quality in the world’s second-largest economy will deteriorate. The euro fell for a second day against the yen and copper led metals lower.

An index of financial shares on the MSCI Asia Pacific Index fell 0.3 percent as of 11:20 a.m. in Tokyo, while an index of Chinese companies traded in Hong Kong sank 1.3 percent. Standard & Poor’s 500 Index futures slid less than 0.1 percent. The euro fell 0.1 percent to 116.85 yen. Oil traded near a three-week high in New York, while copper snapped a six-day rally in London.

The sale of stakes in China Construction Bank Corp. and Bank of China Ltd. by Temasek Holdings Pte come as a Moody’s Investors Service said problem loans to local governments in China may exceed official estimates. The ratings company yesterday cut Portugal’s credit rating to below investment grade. Data today may show German factory orders and the U.S. services industry grew at a slower pace, as investors look ahead to July 8 report that may show American payrolls climbed.

“Investors are underestimating the commitment of the Chinese government to keep on tightening, which of course means that some sectors of the market, such as the financials, are vulnerable to issues like potential bad loans,” said Mikio Kumada, a global strategist at LGT Capital Management in Singapore. “It will stay with us for a while.”

Hynix Semiconductor Inc. slumped 4.8 percent after Hyundai Heavy Industries Co. ruled out bidding for a 15 percent stake in the chipmaker. Shares of Hyundai Heavy rose 6.5 percent.

China’s Banks

China Construction Bank dropped 3.4 percent in Hong Kong, while Bank of China sank 4.2 percent. The Chinese banks were the biggest drag on the MSCI Asia Pacific Financials Index, the only industry group on the Asia-Pacific gauge to decline today. Singapore’s Temasek raised HK$28.2 billion ($3.62 billion) from the sale of shares in two of China’s three largest banks.

The nation’s seven-day repurchase rate, which measures interbank funding availability, jumped 54 basis points to 7.42 percent, according to a weighted average rate compiled by the National Interbank Funding Center.

The S&P 500 slipped 0.1 percent yesterday, its first drop in six days. Treasury 10-year yields were little changed at 3.13 percent, after falling six basis points yesterday.

U.S. Data

A report today may show the Institute of Supply Management’s index for non-manufacturing businesses, which cover about 90 percent of the economy, fell to 53.7 in June from 54.6, according to a Bloomberg News survey of economists. Labor Department data due July 8 may show payrolls climbed by 100,000 workers after a 54,000 increase in May, a separate survey showed.

The euro traded at $1.4446 from $1.4429 yesterday, when it touched $1.4397, the lowest level since June 29 after Moody’s yesterday cut Portugal’s long-term ratings to Ba2, two levels below investment grade. The reductions stem partly from “the growing risk that Portugal will require a second round of official financing before it can return to the private market,” Moody’s said in a statement.

Greece’s bondholders will meet with officials in Paris today to discuss their role in a second rescue of the indebted nation.

The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment increased, with the Markit iTraxx Australia index climbing one basis point to 110.5 basis points, Westpac Banking Corp. prices show. That’s on track for the second increase this week following five days of declines.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 0.5 basis point to 111, according to Royal Bank of Scotland Group Plc prices.

Oil, Metals

Crude for August delivery added 0.2 percent to $97.37 a barrel on the New York Mercantile Exchange, following a 2.1 percent jump yesterday. An Energy Department report tomorrow may show crude stockpiles dropped 2.5 million barrels last week, the longest streak since January. The industry-funded American Petroleum Institute will report its own data today.

Copper for three-month delivery lost 0.3 percent to $9,509.5 a metric ton on the London Metal Exchange, following a six-day, 6.4 percent gain. Zinc slipped 0.5 percent, while lead retreated 0.4 percent.

--With assistance from Yusuke Miyazawa and Yoshiaki Nohara in Tokyo, Alexander Kwiatkowski in Beijing and Kristine Aquino in Singapore. Editors: Shelley Smith, Shiyin Chen

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Yudith Ho in Singapore at yho29@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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