Asian Stocks Drop on U.S. Unemployment, Australian Carbon Tax
July 11, 2011, 5:24 AM EDTBy Jonathan Burgos
July 11 (Bloomberg) -- Asian stocks fell, with the regional benchmark index headed for its biggest drop in three weeks, as U.S. unemployment unexpectedly increased, dimming the outlook for the global economic recovery and exporters’ earnings.
Samsung Electronics Co., which gets about 22 percent of sales from America, slid 2.3 percent in Seoul as U.S. nonfarm payrolls rose at the slowest pace in nine months. Li & Fung Ltd., a supplier of toys and clothes that counts the U.S. as its biggest market, sank 3.8 percent in Hong Kong. MacArthur Coal Ltd., BlueScope Steel Ltd. and Qantas Airways Ltd. led declines among Australian companies after the government announced the country’s first tax on greenhouse-gas emissions.
“After the recent rally, structural problems are still there,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversaw $323 billion as of March 31. “Jobs data in the U.S. continue to point to anemic growth. While Greece’s debt problems have been pushed out, eventually it will come back to haunt us.”
The MSCI Asia Pacific Index slipped 1.2 percent to 136.77 as of 6 p.m. in Tokyo, headed for its steepest drop since June 16. Three stocks fell for each that rose on the measure. The gauge last week extended its rally to a third week as European Union leaders hammered out proposals to roll over debt to prevent Greece from defaulting and after reports showed retail sales in the U.S. increased in June, and initial claims for unemployment benefits declined.
Australia Leads Drop
Japan’s Nikkei 225 Stock Average slid 0.7 percent. South Korea’s Kospi Index dropped 1.1 percent. Hong Kong’s Hang Seng Index declined 1.7 percent. China’s Shanghai Composite Index gained 0.2 percent, erasing losses of as much as 0.6 percent, on speculation inflation is peaking.
Australia’s S&P/ASX 200 Index sank 1.6 percent after Prime Minister Julia Gillard said yesterday polluters in Australia will pay A$23 ($24.74) per metric ton of carbon emissions. The country relies on coal to generate 80 percent of its electricity.
Futures on the Standard & Poor’s 500 Index lost 0.9 percent today. The index dropped 0.7 percent on July 8 as the weakest American job growth in nine months hurt companies most-closely tied to the economy.
U.S. payrolls increased by 18,000 in June, less than the most pessimistic forecast in a Bloomberg News survey of economists, which called for growth of 105,000 on average. The jobless rate rose to a 2011 high of 9.2 percent.
‘Risk Off’
“Investors had high expectations for the U.S. employment data, but they were disappointed by the result,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “Investors will be looking to take some risk off the table.”
Samsung Electronics, South Korea’s No. 1 exporter of consumer electronics, dropped 2.3 percent to 865,000 won in Seoul. Li & Fung, the biggest supplier of toys and clothes to Target Corp. and Wal-Mart Stores Inc., sank 3.8 percent to HK$14.26 in Hong Kong. James Hardie Industries SE, the largest seller of home siding in the U.S., slumped 4.6 percent to A$5.80 in Sydney.
Australian coal mining companies and steelmakers dropped after the government said it will require about 500 businesses to pay tax on greenhouse-gas emissions, raising A$27.8 billion.
MacArthur Coal declined 2.8 percent to A$11.08. BlueScope Steel, the No.2 producer of the metal in Australia by market value, dropped 6.7 percent to A$1.26. Qantas Airways Ltd., Australia’s largest airline, fell 3.3 percent to A$1.935 after saying the tax will cost as much as A$115 million in the year ending June 30, 2013.
Hastening the ‘Inevitable’
“Companies that are uncompetitive on a global basis are going to suffer the most,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management. “Even after the initial subsidies for certain industries, the carbon tax will bring forward the inevitable for some, which may be closure or withdrawal from the industry.”
Separately, Qantas pilots voted in favor of industrial action, which may include a strike, the Australian and International Pilots Association said today in Sydney. The pilots are seeking pay increases and limits to the use on non- Qantas crewmembers on Qantas-branded flights.
Raw material producers dropped after crude oil and metal futures fell. BHP Billiton Ltd., the world’s biggest mining company, lost 1.5 percent to A$44.30. Rio Tinto Group, the second-largest mining company by sales, slid 1.4 percent to A$83.20. Cnooc Ltd., China’s No. 1 offshore oil and gas producer, fell 1.5 percent to HK$18.22 in Hong Kong.
Crude oil for August delivery declined 2.5 percent to settle at $96.20 a barrel in New York on July 8, the biggest drop since June 23. The London Metal Exchange Index of prices for six metals including copper and aluminum dropped 1.1 percent.
Sportswear, Semiconductors
China Dongxiang Group Co., a sportswear retailer, tumbled 16 percent to HK$1.75, the biggest decline on the MSCI Asia Pacific Index. The company predicted sales may have dropped by about 45 percent in the six months ended June 30, compared with a year earlier.
Competitors also declined. Anta Sports Product Ltd. slumped 8.2 percent to HK$12.48 after JPMorgan Chase & Co. cut its rating to “neutral” from “overweight.” Peak Sports Products Ltd. fell 5.7 percent to HK$4.96.
Elpida Memory Inc., the world’s third-largest maker of computer-memory chips, plunged 13 percent to 787 yen in Tokyo. The company said it plans to raise 79.7 billion yen ($987 million) selling shares and convertible bonds to fund investments and pay off debt. Reuters earlier today reported the sale plan.
The MSCI Asia Pacific Index increased 0.5 percent this year through July 8, compared with a gain of 6.9 percent by the S&P 500 and a drop of 0.7 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.8 times estimated earnings on average, compared with 13.5 times for the S&P 500 and 11 times for the Stoxx 600.
--With assistance from Akiko Ikeda and Satoshi Kawano in Tokyo and Shani Raja in Sydney. Editors: Nick Gentle, Jason Clenfield.
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
