Bloomberg News

Asian Stocks Fall on Concern Europe Debt Crisis to Persist

October 05, 2011

Oct. 5 (Bloomberg) -- Asian stocks dropped, led by exporters, as a downgrade of Italy’s credit rating overshadowed signs that Europe may reach consensus on measures to shield its banks from the sovereign-debt crisis.

Toyota Motor Corp., the world’s biggest carmaker, fell 2 percent in Tokyo. Japanese utilities slumped on speculation the government will change the framework for pricing electricity. BHP Billiton Ltd., the largest mining company, gained 3.8 percent in Sydney as commodity prices rallied after the Financial Times reported Europe is nearing a plan to recapitalize its banks.

The MSCI Asia Pacific Index fell 0.2 percent to 107.44 as of 6:13 p.m. in Tokyo. Almost two stocks fell for each that advanced. The gauge tumbled 16 percent in the third quarter, the biggest drop since 2008, amid concern that Europe’s debt crisis and a U.S. economic slowdown will drag the world back into recession.

“There still remains considerable work to be done to stabilize both the sovereign debt and banking sector in Europe,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. Stocks in Asia “remain vulnerable to further disappointments.”

Japan’s Nikkei 225 Stock Average fell 0.9 percent. South Korea’s Kospi Index slumped 2.3 percent. Australia’s S&P/ASX 200 advanced 1.4 percent. The Hong Kong stock exchange is closed today for a public holiday.

‘Increasingly Shared View’

Futures on the Standard & Poor’s 500 Index gained 0.4 percent today. The index finished up 2.3 percent yesterday in New York, reversing a loss in the final 50 minutes of trading, after the Financial Times quoted Olli Rehn, European Union commissioner for economic affairs, as saying there’s an “increasingly shared view” that the region needs a coordinated approach to halt the sovereign debt crisis.

Markets from Tokyo to Taiwan dropped after Italy’s credit rating was cut by Moody’s Investors Service after U.S. markets closed. The downgrade, the first in almost two decades, came on concern Prime Minister Silvio Berlusconi’s government won’t be able to cut the region’s second-largest debt amid weak growth.

Moody’s lowered Italy’s rating three levels to A2 from Aa2, with a negative outlook, the New York-based agency said in a statement yesterday. The action followed a ratings cut by Standard & Poor’s on Sept. 20.

‘No Concrete Measures’

Exporters to Europe dropped. Toyota fell 2 percent to 2,517 yen in Tokyo. Sony Corp., Japan’s No. 1 exporter of consumer electronics that depends on Europe for 22 percent of its sales, slid 1.8 percent to 1,404 yen. Brambles Ltd., a supplier of warehousing pallets, sank 0.5 percent to A$6.17 in Sydney.

“No concrete measures on solving Europe’s crisis have come out,” said Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest listed bank. “There won’t be an end to the market’s volatility until we see something that will calm the situation.”

Tokyo Electric Power Co., the utility known as Tepco, plunged 12 percent to 203 yen. Kansai Electric Power Co. dropped 4.2 percent to 1,239.

Utility Firms

Trade Minister Yukio Edano said the government will review the current electricity price framework, the Asahi newspaper reported. Edano indicated he will start reforms, including requesting utilities to review costs used to determine electricity tariffs, according to the paper.

GS Engineering & Construction Corp. slumped 15 percent to 74,100 won in Seoul and Daelim Industrial Co. sank 14 percent to 70,500 won. The builders dropped amid speculation that recent oil price declines will damp plant construction demand in the Middle East, according to Im Jeong Jae, a fund manager at Shinhan BNP Paribas Asset Management Co.

Among stocks that rose today, Australian resources companies advanced after crude oil prices surged as much as 3.7 percent today and the price of copper rose.

BHP Billiton gained 3.8 percent to A$35.13 in Sydney. Rival Rio Tinto Group climbed 2.2 percent to A$60.30. Lynas Corp., an Australian rare-earths producer, surged 6.9 percent to 1.005 Australian cents.

iPhone Upgrade

Samsung Electronics Co., the world’s second-largest maker of mobile phones, added 1.7 percent to 842,000 won in Seoul after Apple Inc. unveiled an upgrade to the iPhone 4, short of an overhaul of the model. LG Electronics Inc., the world’s third-largest, advanced 0.4 percent to 69,500 won.

“LG has been the biggest victim of the iPhone,” Kang Yoon Hum, an analyst at NH Investment & Securities Co., said by phone. “If Apple shows a crack, people in the market seem to think LG might be able to squeeze in.”

The MSCI Asia Pacific Index declined 22 percent this year through yesterday, compared with an 11 percent drop by the S&P 500 and a 21 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 11 times estimated earnings on average, compared with 11.2 times for the S&P 500 and 9 times for the Stoxx 600.

--Editors: John McCluskey, Jason Clenfield, Jim Powell.

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

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net.


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