Bloomberg News

Asian Stocks Decline on Earnings Concern; Qantas Airways Jumps

October 31, 2011

Oct. 31 (Bloomberg) -- Asian stocks declined, with the MSCI Asia Pacific Index trimming its biggest monthly advance in two years, as companies from Acer Inc. to Tohoku Electric Power Co. reported losses and China vowed to maintain property lending curbs.

Acer, the world’s fourth-largest computer maker, fell 2 percent in Taipei. Tohoku Electric slumped 7.4 percent after the Japanese utility reported a wider-than-expected net loss. Agricultural Bank of China Ltd. led the mainland’s lenders lower after Premier Wen Jiabao said China will “firmly” maintain restrictions on the real-estate market. Qantas Airways Ltd. jumped 4.2 percent in Sydney as it resumed flights today after the government intervened in a labor dispute.

The MSCI Asia Pacific Index dropped 2.8 percent to 121.20 as of 1:05 p.m. in Tokyo. The measure gained 11 percent this month through Oct. 28, the most since May 2009, after a breakthrough in Europe boosted confidence the region’s sovereign-debt crisis will be contained, U.S. economic growth accelerated and China hinted at easing monetary policy.

“There will be some earnings misses as business sentiment had been severely affected in the third quarter because of the flooding in Thailand and lingering concerns about Europe,” said Ng Soo Nam, the Singapore-based chief investment officer at Nikko Asset Management Asia Ltd., which oversees about $165 billion. “There’s still scope for sentiment-driven volatility.”

Nikkei, Kospi

Japan’s Nikkei 225 Stock Average fell 0.2 percent, paring losses of as much as 0.6 percent, after the yen dropped from record gains against the dollar as the Japanese government intervened in the markets to weaken the currency. A stronger yen hurts the earnings of Japanese exporters when sales from overseas are converted into the local currency.

Australia’s S&P/ASX 200 dropped 0.8 percent. South Korea’s Kospi Index fell 1.1, erasing gains of as much as 0.6 percent. Hong Kong’s Hang Seng Index declined 1.1 percent, while China’s Shanghai Composite slid 0.5 percent.

Futures on the Standard & Poor’s 500 Index declined 0.5 percent today. In New York, the index was little changed on Oct. 28, rising 3.8 percent last week. That was the gauge’s fourth straight weekly advance and left the Standard & Poor’s 500 Index poised for the biggest monthly rally since 1974.

Market Hangover

“As a result of the European Union announcement, risk assets performed exceptionally well,” Nick Maroutsos, who oversees the equivalent of about $3 billion at Sydney-based Kapstream Capital, said in a Bloomberg Television interview. “The market suffered a bit of a hangover on Friday. As with any big party, the day after can be a bit sobering. We’re certainly not ready to sound the all clear yet.”

European governments are running into initial resistance as they seek to use this week’s Group of 20 summit to turn early praise for their revamped crisis-fighting strategy into financial support. While the help of China and cooperation of the International Monetary Fund were immediately sought, pledges of hard cash are proving hard to come by as G-20 members press for more details of the plan.

The MSCI Asia Pacific Index declined 9.5 percent this year through Oct. 28, compared with a 2.2 percent gain by the S&P 500 and a 9.7 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 12.6 times estimated earnings on average, compared with 12.9 times for the S&P 500 and 10.8 times for the Stoxx 600.

Earnings Performance

Of the 288 companies on the Asian gauge that have reported earnings since Oct. 11, 157 missed analysts’ estimates, while 92 exceeded expectations, according to data compiled by Bloomberg.

Acer dropped 2 percent to NT$34.70. The company reported last week a third-quarter net loss of NT$1.1 billion ($37 million), its second straight loss, and said global shipments this quarter will fall as much as 10 percent amid excess inventory, a slowing computer market and a shortage of disk drives.

Tohoku Electric slumped 7.4 percent to 859 yen in Tokyo after reporting a wider-than-expected first-half net loss of 108.3 billion yen ($1.4 billion).

Chinese lenders and property developers retreated after Premier Wen Jiabao said China will “firmly” maintain its property curbs and “fine tune” other economic policies at an appropriate time. Local authorities should continue to strictly implement the central government’s real-estate policies in the coming months to let citizens see the results of the curbs, according to a statement on Oct. 29 following a State Council meeting chaired by the premier.

Qantas Flies Again

Agricultural Bank of China, the nation’s largest lender by number of branches, slumped 6.1 percent to HK$3.38 in Hong Kong. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, dropped 3 percent to HK$4.87. China Resources Land Ltd., a state-owned developer, sank 5.9 percent to HK$11.48. China Overseas Land & Investment Ltd., the No. 1 mainland developer listed in Hong Kong, declined 5.9 percent to HK$14.62.

Among stocks that advanced, Qantas Airways gained 4.2 percent to A$1.61 in Sydney. The airline is resuming flights today after grounding its fleet two days ago and stranding 80,000 passengers in a move that prompted the government to intervene in union disputes that cost the company more than $100 million.

“It’s been a public relations disaster but the status quo for Qantas was not sustainable,” said Matt Williams, who helps manage A$17 billion ($18 billion) of assets at Sydney-based Perpetual Ltd. “In the fullness of time, people will be back and they’ll recover from the public relations side of things.”

--Editor: John McCluskey

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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


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