Bloomberg News

Asian Stocks Decline on Concern After Moody’s China Banks Report

July 05, 2011

July 5 (Bloomberg) -- Asian stocks fell as Chinese banks declined after Moody’s Investors Service said mainland lenders may hold more problem loans on their books than had been anticipated.

Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, fell 0.5 percent in Hong Kong. National Australia Bank Ltd. slid 1.1 percent in Sydney after the Reserve Bank of Australia said the nation’s growth may be weaker than previously forecast. 77 Bank Ltd., a Japanese lender based in the area worst hit by the March 11 tsunami, advanced 1.6 percent after Nomura Holdings Inc. said it was bullish on regional banks. Shimao Property Holdings Ltd. gained 4.9 percent in Hong Kong after saying sales rose.

“China remains at the forefront of investors’ minds given its increasingly large contribution to global growth,” said Tim Schroeders, who helps manage $1 billion in global equities as a portfolio manager at Pengana Capital Ltd. in Melbourne. “Any slowdown in the rate of growth has heightened flow-on effects to growth expectations, not only in China but globally.”

The MSCI Asia Pacific Index fell 0.2 percent to 136.92 as of 7:31 p.m. in Tokyo, reversing earlier gains of as much as 0.2 percent. About an equal numbers of shares rose and fell on the 1,018-member gauge. Through yesterday, the index fell 2.6 percent from this year’s high on May 2 amid concern a slowing U.S. economy, Europe’s sovereign-debt crisis and China’s steps to curb inflation will crimp earnings.

Nikkei, Kospi

Japan’s Nikkei 225 Stock Average climbed less than 0.1 percent after falling as much as 0.2 percent. South Korea’s Kospi Index increased 0.8 percent and Australia’s S&P/ASX 200 Index slipped 0.3 percent. Hong Kong’s Hang Seng index lost 0.1 percent, while China’s Shanghai Composite index climbed 0.1 percent.

Futures on the Standard & Poor’s 500 Index climbed 0.1 percent today. Exchanges in the U.S. were closed yesterday for the Independence Day holiday.

Industrial & Commercial Bank slid 0.5 percent to HK$5.93 in Hong Kong. China Construction Bank Corp., Asia’s No. 2 lender by market value, sank 1.2 percent to HK$6.48, the biggest drag on the Hang Seng index. Bank of China Ltd. declined 0.3 percent to HK$3.86.

Chinese banks fell after Moody’s said in a report today the potential scale of problem loans at the lenders may be closer to its stress case than its base case. The ratings agency said the credit outlook for the Chinese banking industry may turn negative.

RBA Holds Rates

In Sydney, shares declined after RBA Governor Glenn Stevens left the benchmark interest rate unchanged at 4.75 percent and said inflation is expected to near the RBA’s 2 percent to 3 percent target in the next year.

NAB, Australia’s third-biggest bank by market value, slid 1.1 percent to A$25.14, the biggest drag on the MSCI Asia Pacific Index. Commonwealth Bank of Australia fell 0.5 percent to A$51.78 and Westpac Banking Corp. dropped 0.2 percent to A$21.97.

In Taipei, AU Optronics Corp., which makes thin film transistor-liquid crystal displays, slumped 5.2 percent to NT$18.25, while Chimei Innolux Corp., which also makes TFT-LCDs, dropped 6.2 percent to NT$18.80. Goldman Sachs Group Inc. forecasts the two companies will lose money in 2011 and 2012, according to a note dated yesterday.

In Japan, regional banks rose after Nomura said the brokerage is bullish on local lenders. 77 Bank advanced 1.6 percent to 371 yen. Nomura said the bank was its “top pick” on improved earnings prospects. Bank of Yokohama Ltd. rose 1.5 percent to 416 yen and Fukuoka Financial Group Inc. increased 1.8 percent to 349 yen.

Japan’s Local Banks

The regional lenders, which declined along with Japan’s major banks following the March 11 earthquake, tsunami and on- going nuclear crisis, are cheap, Nomura said in a report dated yesterday. Share prices are close to bottoming, the report said.

In Hong Kong, real estate companies rose, as Shimao Property, the Hong Kong-based developer, advanced 4.9 percent to HK$10.68. The company said first-half sales rose 26 percent from a year earlier. China Resources Land Ltd. also rose 3.4 percent to HK$15.14 after the developer said sales in June rose 362.7 percent from a year ago to 4.06 billion yuan ($628 million).

China Overseas Land & Investment Ltd. increased 2.8 percent to HK$17.48 after Citigroup Inc. said it may meet more than 60 percent of its annual sales target in the first half.

In Shenzhen, China Vanke Co., the largest listed mainland Chinese developer by market value, increased 1.5 percent to 8.84 yuan after saying sales in the first six months of the year jumped 79 percent from the same period a year ago.

The MSCI Asia Pacific Index lost 0.4 percent this year through yesterday, compared with a gain of 6.5 percent by the Standard & Poor’s 500 and a drop of 0.1 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.7 times estimated earnings on average, compared with 13.5 times for the S&P 500 and 11.2 times for the Stoxx 600.

--Editors: Jason Clenfield, Brian Fowler

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; 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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