Bloomberg News

Most Asian Stocks Decline Amid U.S., Europe Debt Crisis Concern

July 19, 2011

July 19 (Bloomberg) -- Most Asian stocks fell amid concern U.S. lawmakers will fail to reach a deal on the country’s debt limit and Europe’s worsening sovereign-debt crisis will slow the global economic recovery.

Honda Motor Co., the automaker which receives 44 percent of its sales from North America, declined 2 percent in Tokyo. Mitsubishi UFJ Financial Group Inc., the country’s biggest listed lender by market value, sank 2.5 percent as banks fell globally after stress tests on European lenders failed to alleviate investor concern over the region’s debt crisis. Yangzijiang Shipbuilding Holdings Ltd., China’s third-largest shipyard outside state control, jumped 7.3 percent in Singapore after predicting higher first half profit.

The MSCI Asia Pacific Index was little changed at 135.1 as of 7:42 p.m. in Tokyo after swinging between gains and losses at least eight times. About five stocks fell for every four that rose on the gauge. The measure dropped for the first week in four last week after European finance ministers declined to rule out a temporary default for Greece and as Moody’s Investors Service put the U.S. under review for a possible credit-rating downgrade.

“On top of uncertainty about the U.S. economy, there can only be negativity if the U.S. government’s functionality becomes paralyzed,” said Fumiyuki Nakanishi, senior strategist at SMBC Friend Securities Co. in Tokyo. “In Europe, the stress tests are being seen as too soft, and it’s just postponing the potential for problems.”

Japan’s Nikkei 225 Stock Average fell 0.9 percent. China’s Shanghai Composite Index slipped 0.7 percent. Australia’s S&P/ASX 200 Index lost 0.1 percent. Hong Kong’s Hang Seng Index climbed 0.5 percent, erasing losses of as much as 0.9 percent. South Korea’s Kospi Index was little changed after swinging between gains and losses at least eight times.

U.S. Futures

Futures on the Standard & Poor’s 500 Index gained 0.6 percent today. In New York, the index slipped 0.8 percent to 1,305.44 yesterday, pushing the measure to its worst seven-day period in more than a month, amid concern U.S. lawmakers will fail to reach a deal on the nation’s debt limit before an Aug. 2 deadline.

Global stocks declined as President Barack Obama struggled to get lawmakers to agree to a deficit-cutting deal ahead of the deadline for raising the nation’s $14.3 trillion debt limit and Goldman Sachs Group Inc. economists led by Jan Hatzius, based in Germany, cut their forecasts for real annualized U.S. economic growth to 1.5 percent in the second quarter and 2.5 percent in the third quarter, from 2 percent and 3.25 percent respectively.

Honda Motor, which counts North America as its biggest market, fell 2 percent to 3,145 yen in Tokyo. Canon Inc., the world’s largest camera maker by sales, sank 2.8 percent to 3,680 yen. Li & Fung Ltd., the largest supplier of toys and clothes to Target Corp. and Wal-Mart Stores Inc., declined 3.6 percent to HK$13.48 in Hong Kong.

Exporters to Europe declined as European Union leaders are struggling to convince investors that they will agree on a second Greek bailout at a summit on July 21. Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, decreased 1.9 percent to HK$12.76. Mazda Motor Corp., the Japanese carmaker most reliant on European markets, dropped 0.9 percent to 213 yen in Tokyo.

Stress Tests

“We’re unable to see the end of the sovereign-debt crisis in Europe, and fears are refusing to abate,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset?Management Co., which oversees about $104 billion. “The results of what’s happening in Europe are beating down bank stocks.”

Shares of European banks fell below the book value of their tangible assets for the first time in two years yesterday on concern the region’s banks may have to raise as much as 80 billion euros ($113 billion) of additional capital as stress tests failed to allay investor concern about a Greek default.

Investors are testing the EU’s resolve to end the sovereign-debt crisis by pushing Italian and Spanish bond yields toward levels that forced Greece, Ireland and Portugal to ask for help, sparking concern costs may rise for Asia-Pacific banks.

Mitsubishi UFJ Financial slid 2.5 percent to 383 yen in Tokyo. Sumitomo Mitsui Financial Group Inc., Japan’s second- biggest bank by market value, fell 1.3 percent to 2,404 yen. Commonwealth Bank of Australia, the nation’s largest lender by market value, lost 0.7 percent to A$48.55.

Catcher, Yangzijiang

The MSCI Asia Pacific Index lost 1.9 percent this year through yesterday, compared with a gain of 3.8 percent by the S&P 500 and a drop of 5 percent by the Stoxx Europe 600 Index in the same period. Stocks in the Asian benchmark were valued at 13.4 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 10.5 times for the Stoxx 600.

Among stocks that advanced, Yangzijiang Shipbuilding jumped 7.3 percent to S$1.325 in Singapore after saying it’s “confident” of posting at least a 30 percent increase in net profit in the first half ended June 30. Separately, The company said there are no immediate plans to sell convertible bonds.

Catcher Technology Co., which makes metal casings for Apple Inc. computers, surged 6.9 percent to NT$224.5 after Citigroup Inc. and Macquarie Group Ltd. both raised their share-price estimates by 22 percent. The brokerages said the company will supply parts to Blackberry maker Research in Motion Ltd. and benefit from Dell Inc. orders. James Wu, a Catcher spokesman, didn’t immediately answer or return calls to his office seeking comment.

--With assistance from Anna Kitanaka and Toru Fujioka in Tokyo. Editor: Nick Gentle

-0- Jul/19/2011 10:44 GMT

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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