Bloomberg News

Asia Stocks Headed for Lowest in a Week on Europe Debt Wrangling

October 20, 2011

Oct. 20 (Bloomberg) -- Asian stocks slid, with the benchmark regional index headed to its lowest close in more than a week, amid uncertainty about European bailout-fund talks and as U.S. companies grew more pessimistic about the outlook for the world’s largest economy.

Sharp Corp., a Japanese maker of liquid-crystal displays that gets about half of its revenue overseas, fell 2.1 percent in Tokyo. Esprit Holdings Ltd., a clothier that gets most of its sales in Europe, sank 7.8 percent in Hong Kong. BHP Billion Ltd., the world’s biggest mining company, dropped 2.5 percent as commodity prices dropped. Newcrest Mining Ltd., Australia’s largest gold mining company, sank 6.4 percent after saying quarterly gold output sank from a year earlier.

The MSCI Asia Pacific Index sank 1.7 percent to 115.37 as of 7:40 p.m. in Tokyo, headed for its lowest close since Oct. 10. More than four stocks fell for each for each that gained on the gauge.

“U.S. economic conditions don’t appear to be getting any better, and in fact there’s some risk it might get worse, so that doesn’t give investors much comfort at all,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney. “There appears to be growing concern about whether or not European leaders meeting on the weekend will be able to come up with a credible plan.”

The MSCI Asia Pacific Index declined 15 percent this year through yesterday as Europe’s smoldering debt crisis, slowing U.S. economic growth and tighter monetary policy in China crimped the earnings outlook for the region’s companies. Europe’s leaders have pledged to use a meeting this weekend to develop a plan to tackle the crisis.

China Stocks Slide

Australia’s S&P/ASX 200 slid 1.6 percent after a report from National Australia Bank Ltd. showed the nation’s third- quarter business confidence fell to a three-year low. Japan’s Nikkei 225 Stock Average retreated 1 percent. South Korea’s Kospi Index fell 2.7 percent. Singapore’s Straits Times Index lost 1 percent.

Hong Kong’s Hang Seng Index lost 1.8 percent as Chinese companies fell amid slower economic growth and signs that tighter monetary policy will persist while inflation remains high.

The Bangkok SET Index sank 3.1 percent amid concern Thailand’s worst floods in 50 years will crimp economic growth.

Builder Supalai Pcl sank 4.2 percent to 11.30 baht, while L.P.N. Development Public Co. retreated 1 percent to 9.80 baht as KGI Securities (Thailand) Pcl cut Thai residential property to “underweight” from “overweight” to reflect the impact of the global economic slowdown and prolonged flooding.

U.S. Futures

The Asia-Pacific measure’s slide compares with a 3.8 percent drop by the U.S. Standard & Poor’s 500 Index and a 14 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.9 times estimated earnings on average at the last close, compared with 12.1 times for the S&P 500 and 10.2 times for the Stoxx 600.

Futures on the S&P 500 expiring in December gained 0.4 percent today. The index lost 1.3 percent yesterday.

Sharp slid 2.1 percent to 667 yen in Tokyo, while Nintendo Co., the maker of Wii game consoles which gets about 41 percent of its revenue from Europe, sank 1.8 percent to 11,800 yen in Osaka. Esprit slumped 7.8 percent to HK$10.48 in Hong Kong.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an Oct. 19 meeting of European leaders in Frankfurt failed to resolve differences ahead of a summit scheduled for this weekend. French Finance Minister Francois Baroin said the region’s bailout fund could be improved with help from the European Central Bank, a position opposed by the ECB and Germany.

‘Pretty Nervous’

“We remain pretty nervous about Europe’s crisis because we have yet to see a concrete safety-net being established for the financial system,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Pessimism about Europe sets the tone for the market’s sentiment.”

The Fed’s Beige Book survey showed companies reported more doubt about the recovery even as the economy maintained its expansion last month.

U.S. economic “conditions aren’t fabulous,” said White Funds Management’s Gluskie. “They’re not going backward, but they’re not dramatically improving. If it’s improving, it’s very slight, and at this stage that’s not enough to give investors huge confidence.”

Commodity Suppliers

BHP slid 2.5 percent to A$35.48 in Sydney. Jiangxi Copper Co., China’s No. 1 producer of the metal, fell 3.7 percent to HK$15 in Hong Kong. Korea Zinc Co., a producer of precious metals, plunged 10 percent to 279,000 won in Seoul.

The Thomson Reuters/Jefferies CRB Index of raw materials fell 1.3 percent yesterday. Crude oil for November delivery dropped $2.23 to settle at $86.11 a barrel on the New York Mercantile Exchange. The London Metals Exchange Index, a measure of six metals, retreated 2.3 percent yesterday.

Newcrest Mining sank 6.4 percent to A$33.45 in Sydney. The Melbourne-based company said its gold output for the three months ended September fell to 587,296 ounces from 674,219 ounces a year earlier.

Nanya Technology Corp., a Taiwanese memory-chip maker, tumbled 6.8 percent to NT$3.58 after its third-quarter net loss widened to NT$12 billion ($398 million) from NT$2.27 billion a year earlier.

China Shares Fall

Chinese shares slumped after Liu Mingkang, chairman of the China Banking Regulatory Commission, said risks stemming from private lending must be “strictly controlled,” and such loans will be curbed.

Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value, sank 1.4 percent to HK$2.84 in Hong Kong, while China Citic Bank Corp. slumped 2.1 percent to 4.25 yuan in Shanghai.

Consumer prices in China increased 6.1 percent in September from a year earlier, the National Bureau of Statistics said last week. The government’s full-year inflation target is 4 percent.

The central bank is unlikely to loosen its monetary policies as inflation remains “high,” said Liu Jianwei, a fund manager at Bosera Asset Management Co.

Among stocks that rose, Huabao International Holdings Ltd., a supplier of flavors for tobacco and food, climbed 8.2 percent to HK$4.73 in Hong Kong. The company said controlling stockholder Chu Lam Yiu entered into a derivative transaction related to a long position equivalent to 94.7 million company shares.

In Japan, Tokyo Electric Power Co., the utility at the center of the worst nuclear disaster in 25 years, surged 36 percent to 292 yen. The shares have fallen 86 percent since the March 11 earthquake and tsunami caused meltdowns at the utility’s Fukushima Dai-Ichi nuclear plant.

--With assistance from Masaaki Iwamoto and Yoshiaki Nohara in Tokyo. Editors: Nick Gentle, John McCluskey

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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


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