Bloomberg News

Asian Stocks Drop as Italy Rating Cut Boosts Debt-Crisis Concern

September 20, 2011

Sept. 20 (Bloomberg) -- Asian stocks fell, extending a two- week decline on the region’s benchmark stock index, after Italy’s sovereign-credit ratings were cut, intensifying concern Europe’s debt crisis is worsening and may sour the earnings outlook for exporters, banks and commodity producers.

BHP Billiton Ltd., the world’s biggest mining company, dropped 2.1 percent in Sydney as crude and metal prices tumbled. Rio Tinto Group, the second-largest miner by sales, fell 1.9 percent, extending losses yesterday. Sony Corp. slumped 4.1 percent, leading exporters’ shares lower after Japanese markets resumed trading following yesterday’s public holiday. China Unicom (Hong Kong) Ltd., the nation’s No. 2 mobile phone carrier, rose 3.9 percent in Hong Kong after boosting subscribers.

The MSCI Asia Pacific Index dropped 0.5 percent to 117.93 as of 7:01 p.m. in Tokyo, with about three stocks declining for every two that advanced on the measure. The gauge has fallen for the past two weeks on concern Europe’s crisis is spreading and on signs of slowing U.S. economic growth.

“The Italian downgrade will just renew concerns about sovereign-debt issues spreading from Greece to Italy and Spain,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $150 billion. “Markets are understanding that there is no easy solution” to Europe’s debt crisis, she said.

Japan’s Nikkei 225 Stock Average fell 1.6 percent, pacing declines among Asia’s benchmark index. The MSCI Pacific excluding Japan Index was little changed today after falling 2.8 percent yesterday.

Tech Shares Rise

Australia’s S&P/ASX 200 Index lost 1 and Hong Kong’s Hang Seng Index climbed 0.5 percent after swinging between losses of as much as 1 percent and a 0.7 percent gain. South Korea’s Kospi Index rose 0.9 percent, with technology shares climbing after the won fell to the lowest level this year against the U.S. dollar.

Futures on the Standard & Poor’s 500 Index rose 1 percent, erasing an earlier loss, amid speculation the U.S. Federal Reserve will do more to stimulate economic growth after a two- day policy meeting concludes tomorrow.

The S&P 500 contract expiring in December earlier dropped as much as 1 percent after Italy had its long- and short-term sovereign credit ratings cut to A/A-1 from A+/A-1+ by Standard & Poor’s Ratings Services.

In New York, the S&P 500 fell 1 percent yesterday, paring losses in the final hour of trading as Greece said discussions with European officials about the country’s bailout were productive. Prime Minister George Papandreou’s government will hold another call with its main creditors today as European leaders squabble over the terms of a July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union.

‘Unhappy Financiers’

“We’re in the midst of normal wrangling between recalcitrant debtors and their unhappy financiers,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney. “The current discussions represent minor steps forward, but don’t resolve the underlying issue. While the Italy downgrade isn’t a surprise, it’s an added negative to cope with.”

BHP Billiton, also Australia’s biggest oil producer, fell 2.1 percent to A$36.80 in Sydney, while Rio Tinto declined 1.9 percent to A$68.90.

A measure of primary metals traded in London fell 3.1 percent yesterday and copper futures for December delivery declined 3.8 percent on the Comex. New York-traded copper swung between gains and losses today. The price of crude oil fell as much as 0.7 percent.

Japan Shippers

In Tokyo, Sony slumped 4.1 percent to 1,514 yen. Canon Inc., which depends on Europe for about a third of its sales, lost 0.9 percent to 3,380 yen. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line by sales, retreated 4.3 percent to 178 yen.

Japan’s exporters also fell as the yen rose against the euro today, cutting the value of their overseas income.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, declined 2.9 percent to 335 yen on concern Europe’s debt crisis may spill over into the banking system. In Sydney, National Australia Bank Ltd. slid 2 percent to A$22.

New Measures

Losses in stocks were limited by speculation that Federal Reserve officials will propose new measures to support the U.S. economy when the Federal Open Market Committee completes a two- day meeting tomorrow. Central bank Chairman Ben S. Bernanke told economists on Sept. 8 that policy makers have measures at hand and are “prepared to employ these tools as appropriate.”

The MSCI Asia Pacific Index declined 14 percent this year through yesterday, compared with a 4.3 percent drop by the S&P 500 and an 18 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 12.1 times for the S&P 500 and 9.4 times for the Stoxx 600.

Among stocks that advanced today, China Unicom rose 3.9 percent to HK$17.40 in Hong Kong. The mobile-phone carrier said it added 2.36 million new mobile phone users last month, compared with 2.13 million users in July. Japan Tobacco Inc., the maker of Mild Seven cigarettes, gained 5.4 percent to 368,000 yen in Tokyo. A higher likelihood the government will cut its stake in the tobacco company may mean management can raise dividends, according to a report by JPMorgan Chase & Co.

LG Innotek Co. led gains in shares of South Korean electronic-device exporters after the won fell to the lowest level this year against the U.S. dollar. LG Innotek, a maker of mobile-phone parts, jumped 11 percent to 67,200 won in Seoul, while Samsung Electro-Mechanics Co. gained 8.9 percent to 69,600 won.

Huabao International Holdings Ltd. advanced 14 percent to HK$6.92. The Hong Kong-based fragrance provider, whose investment rating JPMorgan yesterday raised to “overweight” from “neutral,” has climbed for five consecutive days.

--Editors: Nick Gentle, John McCluskey

To contact the reporter on this story: Shani Raja in Sydney at

To contact the editor responsible for this story: Nick Gentle at

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