Asian Stocks Drop on Debt-Contagion Concerns as Financials Fall
July 12, 2011, 5:33 AM EDTBy Jonathan Burgos and Satoshi Kawano
July 12 (Bloomberg) -- Asian stocks fell, with the regional benchmark index heading for the biggest two-day loss since March 15, after U.S. lawmakers failed to agree on cutting the deficit and concern increased that Greece’s debt crisis may spread to bigger European nations, threatening bank earnings.
Sony Corp., which sells about 21 percent of its PlayStation game consoles and other products in Europe, retreated 3 percent in Tokyo. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, declined 2.9 percent. HSBC Holdings Plc, Europe’s No. 1 lender by market value, dropped 3 percent in Hong Kong. BHP Billiton Ltd., the world’s biggest mining company and an oil producer, lost 1.9 percent as crude and metal prices dropped.
“People are worried about the negative impact on financial systems as it’s looking more and more like the debt crisis in Europe will spread from Greece, Ireland and Portugal to bigger countries such as Italy and Spain,” said Yumi Nishimura, an equity-market analyst at Daiwa Securities Capital Markets Co.
The MSCI Asia Pacific Index decreased 1.9 percent to 134.26 as of 6:10 p.m. in Tokyo, headed for its steepest drop since June 16. Almost 14 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.
Europe Bailout
Every major market in Asia fell today. Japan’s Nikkei 225 Stock Average declined 1.4 percent. South Korea’s Kospi Index dropped 2.2 percent. Hong Kong’s Hang Seng Index sank 3.1 percent, while China’s Shanghai Composite Index lost 1.7 percent. Australia’s S&P/ASX 200 Index dipped 1.9 percent.
Futures on the Standard & Poor’s 500 Index slid 1.1 percent today. In New York, the index retreated 1.8 percent to 1,319.49 yesterday. President Barack Obama said he will continue to press congressional leaders for a package of deficit cuts. German newspaper Die Welt cited unidentified “high-ranking” people at central banks in a report saying Euro-area countries may have to double their bailout fund to 1.5 trillion euros ($2.1 trillion) to cover a crisis in Italy.
Exporters to Europe fell after German Finance Minister Wolfgang Schaeuble said “there’s no discussion whatsoever” of doubling the EU’s rescue facility after the Die Welt report. European finance ministers revived the prospect of bond buybacks to ease Greece’s plight and declined to rule out a temporary default, struggling to contain the debt crisis as investors forced 10-year yields on Italian debt to the highest level in a decade.
Exporters Drop
Sony, Japan’s biggest exporter of consumer electronics, dropped 3 percent to 2,136 yen in Tokyo. Canon Inc., the world’s largest camera maker that gets about 32 percent of sales from Europe, slipped 1.8 percent to 3,795 yen. Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its main source of revenue, sank 5.8 percent to HK$22.85.
HTC Corp., the Taiwanese maker of smartphones, slumped 6.9 percent to NT$915 after Apple Inc. accused the company of infringing patents in case that may halt the shipment of HTC phones and tablet computers to the U.S., its biggest market.
Gauges of financial companies, energy producers and raw material supplier led declines among the 10 industry groups in the MSCI Asia-Pacific Index. All of the sub-indexes dropped.
HSBC fell 3 percent to HK$74.75, its biggest decline since March 1. Standard Chartered Plc, the U.K.’s third-biggest bank by market value, slid 2.7 percent to HK$196.60 in Hong Kong. Mitsubishi UFJ dropped 2.9 percent to 397 yen in Tokyo.
The spreads investors demand to hold Italian, Portuguese and Spanish debt over German bunds widened to euro-era records, sparking concern costs may rise for Asia-Pacific banks.
Australian Banks
Australia’s big four banks rely on wholesale debt markets for funding, accounting for 40 percent of liabilities, making them vulnerable to swings in investor confidence, Moody’s Investors Service said in May.
Commonwealth Bank of Australia, the nation’s largest lender by market value, lost 1.8 percent to HK$49.64. Westpac Banking Corp., the second-biggest, dropped 2.1 percent to A$21.14. Smaller rival Australia & New Zealand Banking Group Ltd. fell 2.2 percent to HK$21.08.
Raw material producers declined after crude oil and metal futures dropped. BHP slipped 1.9 percent to A$43.46. Rio Tinto Group, the world’s second-biggest mining company by sales, slid 2.1 percent to A$81.43. Inpex Corp., Japan’s No. 1 energy explorer, decreased 4.6 percent to 584,000 yen
Crude oil for August delivery fell 1.1 percent to $95.15 a barrel in New York yesterday, the lowest level since July 1. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 1.6 percent, the biggest drop since June 2.
‘Red Flags’
Longfor Properties Co., the developer controlled by China’s richest woman Wu Yajun, tumbled 10 percent to HK$12.34 in Hong Kong, the second-biggest decline in the MSCI Asia-Pacific Index. The company is seeking to raise HK$4 billion ($513 million) from a so-called top-up placement, the Hong Kong Economic Journal reported today, citing a prospectus. Longfor said it hasn’t entered into an agreement on the placement reported today.
West China Cement Ltd. slumped 14 percent to HK$2.43 after Moody’s said the maker of the construction material posed the biggest governance and accounting risks of 61 Chinese companies it analyzed. All 61 companies Moody’s examined raised “red flags,” with West China Cement, Winsway Coking Coal Holdings, China Lumena New Materials Corp., Hidili Industry International Development Ltd. and LDK Solar Co. cited as “negative outliers.”
The Asian gauge lost 0.6 percent this year through yesterday, compared with a gain of 4.9 percent by the S&P 500 and a drop of 2.1 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.5 times estimated earnings on average, compared with 13.3 times for the S&P 500 and 10.8 times for the Stoxx 600.
Among stocks that advanced, Macarthur Coal Ltd., the world’s biggest producer of pulverized coal, surged 37 percent to A$15.14, the most on the regional benchmark index. ArcelorMittal, the world’s largest steelmaker, and Peabody Energy Corp. said yesterday they offered to buy the Australian coal producer for A$4.7 billion ($5 billion), or A$15.50 a share.
--Editors: Nick Gentle, John McCluskey.
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
