Bloomberg News

Asian Stocks Head for Lowest Close in a Year on Greece Concerns

September 12, 2011

Sept. 12 (Bloomberg) -- Asian stocks fell, with the benchmark index set for its lowest close in a year, amid speculation Greece may be nearing a default on its sovereign debt, bolstering concern that the crisis will spread.

Commonwealth Bank of Australia, the nation’s largest lender by market value, retreated 4.1 percent. Toyota Motor Corp., the world’s biggest carmaker, dropped 2.1 percent in Tokyo. HSBC Holdings Plc, Europe’s largest lender by market value, lost 5.5 percent in Hong Kong. BHP Billiton Ltd., the world’s No. 1 mining company, sank 3.9 percent in Sydney after oil and metal prices dropped. Cochlear Ltd. tumbled 20 percent after the Australian company announced a product recall.

The MSCI Asia Pacific Index fell 2.3 percent to 118 at 7:45 p.m. in Tokyo, headed for its lowest close since August 2010. The gauge slumped 8.6 percent last month, the most since May 2010, amid concern global economic growth is slowing as Europe’s sovereign-debt crisis spreads and after Standard & Poor’s cut its rating on U.S. credit.

In Europe, “things are probably going to get worse before they get better,” Erwin Sanft, deputy head of Asian equities research at BNP Paribas SA in Hong Kong, said in an interview on Bloomberg Television today. “Here in Asia, we’re looking at much more downside for markets. Much larger economies are being drawn into this crisis.”

Japan’s Nikkei 225 Stock Average dropped 2.3 percent to the lowest close since April 2009. Australia’s S&P/ASX 200 Index sank 3.7 percent. Hong Kong’s Hang Seng Index slumped 4.2 percent, its lowest level since May 2010. India’s BSE India Sensitive Index declined 2.2 percent.

Policy Divisions

Markets in South Korea, China and Taiwan are closed today for holidays.

Futures on the Standard & Poor’s 500 Index lost 1.9 percent today. In New York, the index fell 2.7 percent on Sept. 9 after three German officials said Chancellor Angela Merkel’s government is preparing plans to shore up banks if Greece defaults. The European Central Bank said Juergen Stark resigned from the executive board, suggesting policy makers are divided over how to fight the debt crisis.

Gauges of finance, energy, raw-material and consumer staple stocks were the worst performers of 10 industry measures in the MSCI Asia Pacific Index, dropping at least 1.9 percent. Financial stocks were the biggest drags on the broader Asia Pacific index.

Customer Protection

Commonwealth Bank of Australia dropped 4.1 percent to A$45.45, its biggest decline since March 2009. Mitsubishi UFJ Financial Group Inc., Japan’s largest listed lender by market value, sank 2.7 percent to 323 yen. Toyota declined 2.1 percent to 2,625 yen. Esprit Holdings Ltd., a global clothing retailer that gets more than 80 percent of its sales in Europe, slumped 5.2 percent to HK$18.66.

HSBC dropped 5.5 percent to HK$61.35. The lender also fell after the Independent Commission on Banking said British banks should insulate consumer units from their investment banks to protect customers and taxpayers in the event of a financial crisis.

German lawmakers stepped up their criticism of Greece last week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.

“As long as Europe is divided, we won’t see a clear direction about whether Greece will default or be rescued,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion.

Profit Downgrades

Financial companies also fell as Citigroup Inc. cut its estimates for U.S. banks’ third-quarter earnings by an average 45 percent. The global equities rout and volatility in credit markets will pare earnings from trading and investment banking, according to a report from the brokerage dated yesterday.

Raw material producers and energy explorers declined after oil and metals prices dropped.

BHP slumped 3.9 percent to A$36.45, the biggest drag on the MSCI Asia Pacific Index. BHP also fell after its coking coal miners in Australia went back on strike after failing to agree on pay and work conditions with management.

Rio Tinto Group, the world’s second-largest mining company by sales, fell 4.3 percent to A$68.20. Jiangxi Copper Co., China’s No. 1 producer of the metal by market value, slid 8.4 percent to HK$19.18.

Crude oil for October delivery slipped as much as 2.6 percent, falling for a third day in New York. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum slumped 3.1 percent on Sept. 9.

Cochlear Tumbles

The MSCI Asia Pacific Index declined 12 percent this year through Sept. 9, compared with an 8.2 percent drop by the S&P 500 and a 19 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12 times estimated earnings on average, compared with 11.6 for the S&P 500 and 9.3 times for the Stoxx 600.

In Sydney, Cochlear, which develops and markets hearing aids, tumbled 20 percent to A$57.50. The stock posted its steepest decline since Dec. 2003 and the biggest slump in the MSCI Asia Pacific Index after the company recalled its Nucleus CI500 range because of an increase in failures. UBS AG cut its rating to “sell” from “neutral.”

China Overseas Land & Investment Ltd., the developer controlled by the nation’s construction ministry, sank 7.5 percent to HK$14.30, the biggest decline in the Hang Seng Index. The company said sales in August fell 11 percent to HK$4.4 billion ($564 million) from a year earlier.

Tata Motors Ltd., owner of the Jaguar and Land Rover brands, slumped 4.1 percent to 146.75 rupees in Mumbai after Carl-Peter Forster quit as chief executive officer on Sept. 9, citing “unavoidable personal circumstances.”

Suzuki Motor Corp. fell 2.8 percent to 1,484 yen in Tokyo after German carmaker Volkswagen AG said the Japanese automaker had violated terms by deciding to buy engines from Fiat SpA. Suzuki later said it will ask Volkswagen to sell its shares, saying the alliance has become negative for the independence of its management.

--With assistance from Yoshiaki Nohara in Tokyo. Editors: Darren Boey, Nick Gentle

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Susan Li in Hong Kong at sli31@bloomberg.net

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


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