Asian Stocks Fall for First Week in Four on Europe, U.S. Concern
July 15, 2011, 7:15 PM EDTBy Anna Kitanaka and Satoshi Kawano
July 16 (Bloomberg) -- Asian stocks fell for the first week in four as credit rating agencies put the U.S. on review for a possible downgrade and amid escalating concern the European debt crisis will threaten bank earnings.
Commonwealth Bank of Australia, Australia’s biggest lender by market value, dropped 5.3 percent in Sydney. Mitsubishi UFJ Financial Group Inc., Japan’s biggest listed lender, sank 5.3 percent in Tokyo. Infosys Ltd., the Indian software maker, declined 8.3 percent in Mumbai after forecasting sales that missed analysts’ estimates. HTC Corp., a Taiwanese smartphone maker, fell 6.5 percent after it was accused of infringing Apple Inc. patents in a case that may halt U.S. imports of the Taiwanese company’s phones and its new Flyer tablet computers.
The MSCI Asia Pacific Index declined 1.95 percent to 135.68, its first weekly decline since the week through June 17. The measure dropped as European finance ministers declined to rule out a temporary default for Greece and as the yield on Italy’s 10-year bonds rose to the highest level in a decade, threatening the country’s ability to finance its debt.
“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.
Japan, South Korea
Japan’s Nikkei 225 Stock Average and South Korea’s Kospi Index both fell 1.6 percent. Australia’s S&P/ASX 200 Index declined 3.9 percent. Hong Kong’s Hang Seng Index dropped 3.7 percent while China’s Shanghai Composite Index climbed 0.8 percent after the nation’s economy expanded more than estimated last quarter, easing concern the central bank’s policy tightening measures are curbing growth.
In Sydney, Commonwealth Bank declined 5.3 percent to A$49.02. National Australia Bank Ltd. fell 6.9 percent to A$23.40. Mitsubishi UFJ Financial Group dropped 5.3 percent to 393 yen in Tokyo. HSBC Holdings Plc, Europe’s biggest bank by market value, slid 3.4 percent to HK$75.60 in Hong Kong.
Asian exporters including Toyota Motor Corp. and Li & Fung Ltd. declined as Moody’s Investors Service and Standard & Poor’s Ratings Service said they may cut the U.S.’s credit rating on concern Congress won’t be able to raise the government debt ceiling in time to prevent a missed payment.
Toyota, the world’s largest automaker by market value, dipped 3.3 percent to 3,330 yen. Honda Motor Co., an automaker which receives about 84 percent of its revenue from outside Japan, slipped 1.5 percent to 3,210 yen. Li & Fung, which counts the U.S. as its biggest market, dropped 7 percent to HK$13.78 in Hong Kong.
U.S. Rating
The U.S., rated Aaa since 1917, was put on review for the first time since 1996 on concern the debt threshold won’t be raised in time to prevent a missed interest or principal payment on outstanding bonds and notes, even though the risk remains low, Moody’s said in a statement on July 13.
The country’s ratings were put on Creditwatch negative by S&P on July 14, meaning there’s a one-in-two chance they may be cut in the following 90 days.
“We’re seeing cautious trade as investors assess the likelihood of a U.S. debt de-rating that may increase the chances of a double-dip recession that would hurt Asian exporters,” said Tim Schroeders, who helps manage $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “Moody’s action is a shot over the bows telling U.S. politicians that failure to reach agreement on the debt ceiling would have dire consequences for the economy.”
Safer Assets
Even as the ratings companies warned of downgrades, U.S. Treasuries were still set for a weekly gain and three auctions this week attracted higher-than-average bidding as the worsening European debt crisis spurred investor demand for safer assets.
Stocks also declined after the Federal Reserve Chairman, Ben S. Bernanke, testifying before the Senate Banking Committee on July 14, ruled out immediate further bond purchases to stimulate the economy.
“We’re not prepared at this point to take further action,” he said. During the previous day, he had said he was prepared to provide more stimulus if needed. The Fed last month completed a $600 billion program of Treasury bond purchases that aimed to stimulate the economy by reducing borrowing costs, boosting stock prices and spurring consumer spending.
Among other stocks that fell, Infosys dropped 0.3 percent to 2,731.35 rupees in Mumbai. The company projected sales in the year to March to range from $7.1 billion to $7.3 billion, Bangalore-based Infosys said on July 12. That missed the $7.5 billion average of 56 analyst estimates compiled by Bloomberg.
HTC Falls
In Taipei, HTC slid 6.5 percent to NT$907, after being accused of infringing on Apple Inc. patents. Apple claims HTC is infringing five patents, according to a complaint filed July 8 with the U.S. International Trade Commission in Washington.
HTC continues to “vehemently deny” all of Apple’s past and present claims against it and will continue to protect and defend its own intellectual property, said Grace Lei, HTC’s general counsel on July 12.
Shares in China rose on optimism tightening measures aren’t limiting growth, after a government report showed on July 13 that the country’s economy expanded 9.5 percent from a year earlier last quarter. That compared with a median 9.3 percent estimate in a Bloomberg News survey of 18 economists.
In Shanghai, Industrial & Commercial Bank of China Ltd., the world’s biggest-listed lender by market value, increased 1.4 percent to 4.4 yuan. Agricultural Bank of China Ltd. climbed 0.4 percent to 2.7 yuan. Zijin Mining Group Co., which produces and refines mineral resources, rose 8.9 percent to 5.75 yuan.
“The data suggest China’s economy is growing at a moderate pace but still pretty healthy,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “We’ll focus on inflation figures going forward. If that’s brought under control, growth will pick up again and that’ll be positive for stocks.”
--With assistance from Shani Raja in Sydney, Jonathan Burgos in Singapore and Zhang Shidong in Shanghai. Editors: Jason Clenfield, Paul Tighe.
To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
