Bloomberg News

Asia Stocks Set for Lowest in a Year on China Bailout Reluctance

September 14, 2011

Sept. 14 (Bloomberg) -- Asian stocks fell, with the regional benchmark index set for its lowest close in more than a year, after the Chinese premier said economies “must put their own houses in order” and not rely on bailouts from China.

The MSCI Asia Pacific Index earlier swung between gains and losses after French lenders dismissed concerns over their access to funds, easing concern that Europe’s debt crisis may lead to a freezing of credit markets. Commonwealth Bank of Australia, the nation’s largest lender by market value, slumped 2.5 percent in Sydney. Samsung Electronics Co. led technology shares lower after Apple Inc. won backing from a German court for a ban on sales of a Samsung product in the country.

The MSCI Asia Pacific Index fell 1.7 percent to 116.29 as of 7:16 p.m. in Tokyo after earlier rising as much as 0.3 percent. The measure is set to close at its lowest level since Aug. 25, 2010, having erased all the gains since U.S. Federal Reserve Chairman unveiled a $600 billion, second round of asset purchases that came to be known as QE2. All 10 industry groups on the gauge declined.

The measure 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 the U.S. government’s credit rating.

“The Chinese Premier’s comments sounded sensible to me,” said Prasad Patkar, who helps manage about $1.1 billion at Platypus Asset Management Ltd. in Sydney. “But investors at this time seem to want instant gratification. This stance by the Chinese clearly won’t provide that.”

Nikkei, Kospi

Japan’s Nikkei 225 Stock Average slid 1.1 percent, reversing an earlier gain of 0.6 percent. South Korea’s Kospi Index dropped 3.5 percent after being closed for the past two days, when the MSCI Asia Pacific Index fell 2.1 percent.

Australia’s S&P/ASX 200 Index declined 1.6 percent even after a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers showed that the nation’s consumer confidence rebounded from a two-year low in September, ending a four month decline.

Hong Kong’s Hang Seng Index climbed less than 0.1 percent, reversing an earlier 2.1 percent drop. China’s Shanghai Composite Index rose 0.6 percent.

Futures on the Standard & Poor’s 500 Index gained 0.1 percent after falling as much as 1.5 percent today. In New York, the index advanced for a second day, rising 0.9 percent yesterday, after BNP Paribas SA, France’s biggest bank, and Societe Generale SA, the country’s No. 3 lender by assets, rebounded in Paris trading after rejecting concerns over their access to funding.

China Remarks

“Markets rallied on rumors China will be buying Italian bonds and Wen’s comments today ends that speculation,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversaw $323 billion as of June 30. “There’s no easy way out of this sovereign debt crisis as Europe’s problems are structural in nature. We could see further downside.”

Stocks fell today as Chinese Premier Wen signaled developed nations should cut deficits and create jobs rather than relying on China to bail out the world economy. Stocks had gained in the U.S. on Sept. 12 after the Financial Times reported that Italy aims to sell “significant” quantities of bonds and stakes in strategic companies to China.

“Countries must first put their own houses in order,” Wen said today at the World Economic Forum in Dalian, China. “Developed countries must take responsible fiscal and monetary policies. What is most important now is to prevent the further spread of the sovereign debt crisis in Europe.”

Eyes on Europe

Commonwealth Bank of Australia sank 2.5 percent to A$44, the biggest drag on the Australia’s S&P/ASX 200 Index and reversing an earlier gain. Canon Inc., which depends on Europe for about a third of its sales, slid 4.1 percent to 3,295 yen, the second-largest negative influence on the MSCI Asia Pacific Index. Esprit Holdings Ltd., a retailer that gets most of its revenue from Europe, dropped 1.9 percent to HK$18.30, its lowest close since August 2003, ahead of reporting earnings tomorrow.

“We’ve seen stocks bounce around a lot, with all eyes still on Europe,” said Matt Riordan, who helps manage close to $6.6 billion in Sydney at Paradice Investment Management Pty. “The key from here is how governments manage the downside, in terms of how they restructure Greek debt and shore up their banks. The risk beyond this is to what extent this spreads into some of the larger countries.”

Tepco Slides

Among other stocks that fell, Samsung Electronics dropped 3.5 percent to 753,000 won. Apple Inc., the world’s most valuable technology company, won backing from a German court for a ban on sales of Samsung’s Galaxy 10.1 tablet computer in the country. Samsung filed an appeal, the Dusseldorf Regional Court said in a statement.

China Overseas Land and Investment Ltd., a developer controlled by the nation’s construction ministry, fell 3.6 percent to HK$13.78 on concern of reduced property sales. The volume of China’s housing transactions will probably decline in the second-half, Credit Suisse Group AG said in a report today. China Resources Land Ltd., a state-controlled developer, dropped 6 percent to HK$10.40, while Evergrande Real Estate Group Ltd., a developer based in the southern city of Guangzhou, lost 6.2 percent to HK$3.50.

The MSCI Asia Pacific Index declined 14 percent this year through yesterday, compared with a 6.7 percent drop by the S&P 500 and a 20 percent loss by the Stoxx Europe 600 Index.

Stocks in the Asian benchmark are valued at 11.8 times estimated earnings on average, compared with 11.8 for the S&P 500 and 9.2 times for the Stoxx 600.

--With assistance from Jonathan Burgos in Singapore and Bonnie Cao in Shanghai. Editors: Nick Gentle, John McCluskey

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net

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


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