Bloomberg News

Asian Stocks Tumble 10% From May High on Economic Growth Concern

August 05, 2011

Aug. 5 (Bloomberg) -- Asian stocks tumbled, with the regional benchmark index falling more than 10 percent from its May peak, as concern the world economy is weakening sparked an equities rout that drove the Standard & Poor’s 500 Index to its worst slump since February 2009.

Sony Corp., a Japanese exporter of consumer electronics that earns half of its revenue in the U.S. and Europe, slumped 5 percent in Tokyo. Toyota Motor Corp., the world’s largest carmaker, retreated 3.2 percent. BHP Billiton Ltd., the biggest global mining company and Australia’s No. 1 oil producer, sank 4.8 percent as commodity prices dropped and the nation’s central bank slashed the country’s economic growth forecast.

“It’s a panic attack from fear that growth is dropping off a cliff,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “There was an expectation that resolution of the U.S. debt- ceiling issue would trigger a relief rally. It looks like everyone forgot about the weakness in the underlying economy.”

The MSCI Asia Pacific Index slumped 3.6 percent to 126.12 as of 7:48 p.m. in Tokyo. Just 34 stocks advanced on the benchmark of 1,018 companies, the lowest number since October 2008, according to data tracked by Bloomberg. The measure is headed for 7.8 percent decline this week, amid concern the U.S. economic recovery will stall after growth slowed in manufacturing and service industries and employment cooled in the world’s biggest economy.

Weekly Drop

The week’s drop is the biggest weekly decline since October 2008, when credit markets froze following the collapse of Lehman Brothers Holdings Inc. The gauge is down 10 percent from its May 2 high, a decline that some analysts say signals a “correction.”

Japan’s Nikkei 225 Stock Average and South Korea’s Kospi index both sank slipped 3.7 percent. India’s Sensitive Index slipped 2.2 percent in Mumbai.

Hong Kong’s Hang Seng Index slumped 4.3 percent, the biggest plunge since November 2009, while China’s Shanghai Composite Index dropped 2.2 percent.

Australia’s S&P/ASX 200 Index plunged 4 percent after the Reserve Bank of Australia slashed its 2011 economic growth forecast to 2 percent from its previous estimate of 3.25 percent. The central bank raised the outlook for inflation as delays in coal production, risks to global financial markets and subdued consumer spending delay a rebound.

‘May Get Worse’

U.S. options prices soared the most in four years as investors scrambled to buy protection against greater stock- market losses as worsening economic data sent stocks to the longest losing streak since the bull market began in March 2009.

“The latest weakness in stocks is the product of global investors coming to the conclusion that global growth is no longer getting incrementally better and may even get worse,” said Angus Gluskie, who manages about $350 million at White Funds Management in Sydney. “The moves this week reflects the mental capitulation of investors from hope to pessimism, and each day’s fall is only reinforcing the negative outlook.”

Exporters dropped on concern demand from the U.S. and Europe, the two biggest markets for Asian companies, will decline.

Sony Corp., the maker of Bravia televisions and PlayStation game consoles, dropped 5 percent to 1,828 yen in Tokyo. Toyota Motor slipped 3.2 percent to 3,040 yen. Samsung Electronics Co., South Korea’s No. 1 exporter of consumer electronics, fell 3.9 percent to 789,000 won in Seoul. Li & Fung Ltd., the biggest supplier of toys and clothes to retailers including Wal-Mart Stores Inc., dropped 4 percent to HK$12.04 in Hong Kong.

Global Rout

Futures on the Standard & Poor’s 500 Index lost 0.2 percent today. In New York yesterday, the S&P 500 tumbled 4.8 percent to an eight-month low of 1,200.07, erasing its 2011 gain. The Stoxx Europe 600 Index sank 3.5 percent to 243.16 in London, the biggest decline since May 2010.

The global rout, which has wiped out more than $4.5 trillion from market values worldwide since the selling began on July 26, has made stocks “extremely oversold,” Marc Faber, publisher of the Gloom, Boom & Doom report, said on Bloomberg Television.

The MSCI Asia Pacific Index fell 5.8 percent in the last three trading days, its biggest such decline since March 15, amid growing concern the U.S. economy may be heading for another economic recession as consumption remains weak amid the nation’s high unemployment rate.

U.S. Jobs

The U.S. Labor Department said yesterday that initial claims for unemployment insurance payments fell last week to a level that shows limited improvement in the labor market of the world’s biggest economy. Applications for jobless benefits dropped 1,000 in the week ended July 30 to 400,000, the fewest in almost four months.

Employers added 85,000 workers in July, economists project a Labor Department report to show today, failing to reduce a jobless rate that’s holding above 9 percent.

Gauges of raw material producers and energy companies led the decline among the 10 industry groups in the MSCI Asia Pacific Index after commodity prices slumped.

BHP dropped 4.8 percent to A$38.12. United Co. Rusal, the world’s No. 1 aluminum producer, tumbled 12 percent to HK$9.25 in Hong Kong. Glencore International Plc, the world’s largest- listed commodity trader, slumped 8.9 percent to HK$51.40. Cnooc Ltd., China’s biggest offshore oil producer, decreased 5.9 percent to HK$15.54.

Rio Tinto

Crude oil for September delivery fell 5.8 percent to $86.63 a barrel in New York yesterday, the lowest settlement since Feb. 18. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum lost 1.9 percent.

Rio Tinto Group, the world’s second-biggest mining company by sales, also declined 6 percent to A$72 in Sydney after posting first-half profit that missed analyst estimates as costs and currency gains in Australia and Canada hurt earnings.

Of the 402 companies in the MSCI Asia Pacific Index that reported earnings since July 11, 176 beat analyst estimates, while 132 fell short, according to data compiled by Bloomberg.

Billionaire Li Ka-shing’s Cheung Kong Holdings Ltd. and Hutchison Whampoa Ltd. slumped after reporting earnings that missed estimates.

Cheung Kong, Hong Kong’s second-biggest developer by market value, declined 6.2 percent to HK$112.20. The company said yesterday first-half net income almost tripled to HK$33.3 billion ($4.3 billion). That compares with the average estimate of HK$34.9 billion in a Bloomberg survey of five analysts.

Hutchison Whampoa, Li’s biggest company, slumped 8.3 percent to HK$82.90 after posting first-half profit that also missed analyst estimates as a loss at its Australian mobile- phone unit eroded gains from utilities and energy.

The MSCI Asia Pacific Index lost 5 percent this year through yesterday, compared with drops of 4.6 percent by the S&P 500 and 11.8 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13 times estimated earnings on average, compared with 12 times for the S&P 500 and 9.9 times for the Stoxx 600.

--With assistance from Akiko Ikeda and Toshiro Hasegawa in Tokyo. Editors: Jason Clenfield, Nick Gentle

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus