Bloomberg News

Asia Stocks Fall as Debt Crisis Undermines Greece, Italy Leaders

November 07, 2011

Nov. 7 (Bloomberg) -- Asian stocks fell after Greek Prime Minister George Papandreou agreed to step down and as Italian Prime Minister Silvio Berlusconi struggled to keep his majority ahead of a crucial parliamentary vote tomorrow.

HSBC Holdings Plc, Europe’s biggest lender by market value, slipped 1 percent in Hong Kong on speculation bank earnings will be hurt if Europe fails to contain its sovereign-debt crisis. Takeda Pharmaceutical Co. declined 2.3 percent after the Japanese drugmaker slashed its full-year profit outlook. Cnooc Ltd. dropped 2.2 percent after the Chinese oil explorer’s planned purchase of BP Plc’s stake in Argentine crude producer Pan American Energy LLC collapsed.

The MSCI Asia Pacific Index lost 0.4 percent to 119.69 as of 7:37 p.m. in Tokyo, with about three shares falling for every two that rose on the gauge. The measure sank 3.6 percent last week, the most since Sept. 23, after Greece announced plans to hold a referendum on Europe’s rescue package. Prime Minister George Papandreou agreed to step down to allow the creation of a unity government that will help secure international aid.

“It might get worse before it gets better,” Binay Chandgothia, Hong Kong-based portfolio manager at Principal Global Investors said in an interview on Bloomberg Television. “If you look at the experience in the last 12 to 18 months in Europe, the crisis brings out the right solutions. The way they are going to move is one step forward, two steps backward. We have to live with this.”

Japan’s Nikkei 225 Stock Average lost 0.4 percent. Hong Kong’s Hang Seng Index slipped 0.8 percent, while China’s Shanghai Composite Index dropped 0.7 percent. South Korea’s Kospi Index retreated 0.5 percent and Australia’s S&P/ASX 200 fell 0.2 percent. Markets in India, Malaysia, Philippines and Singapore were closed for holidays.

No IMF Agreement

Futures on the Standard & Poor’s 500 Index decreased 1.2 percent, after rising as much as 0.6 percent earlier. In New York, the index fell 0.6 percent on Nov. 4 as the Group of 20 nations’ failure to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis offset a drop in the U.S. unemployment rate.

The refusal of major economies to offer more aid reflected irritation with Europe’s failure to resolve its crisis and foiled investor hopes that the summit would mark a turning point. The turmoil instead flared again with Berlusconi’s allies pressuring him to step aside as the contagion from the region’s sovereign-debt crisis pushed Italy’s borrowing costs to euro-era records.

‘Mounting Opposition’

“Opposition is mounting in Italy against Prime Minister Berlusconi, which is feeding concern that the nation can’t make much progress on rebuilding its finances,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $37 billion. “News out of Italy and Europe’s situation are weighing on stocks as well as bad earnings.”

Financial stocks were the biggest drags on the Asia-Pacific index. European finance chiefs return to Brussels today on a mission to convince global leaders that they can shield countries such as Italy and Spain from the spreading debt crisis by bulking out their bailout fund. Greek leaders are also meeting today to pick a new prime minister after Papandreou said he won’t lead the new government.

HSBC slipped 1 percent to HK$66.90 in Hong Kong. Standard Chartered Plc, the U.K.’s second-biggest lender by market value, dropped 1.9 percent to HK$174.30. Macquarie Group Ltd., the Australian investment bank that gets 16 percent of revenue from Europe, fell 1.3 percent to A$23.04.

The MSCI Asia Pacific Index declined 13 percent this year through Nov. 4, compared with a 0.4 percent drop by the S&P 500 and a 13 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600.

Takeda, Furukawa

Of the 439 companies that reported results on the Asian benchmark index since October 11, 207 missed analysts’ estimates, while 153 exceeded expectations, according to data compiled by Bloomberg.

Takeda Pharmaceutical dropped 2.3 percent to 3,425 yen in Tokyo. The company cut its full-year net income forecast by 32 percent to 170 billion yen ($2.18 billion) on costs related to the acquisition of Swiss rival Nycomed in September.

Furukawa Electric Co., a Japanese cable maker, dropped 12 percent to 192 yen in Tokyo trading, the most since October 2008, after forecasting a full-year net loss of 5 billion yen.

Cnooc fell 2.2 percent to HK$14.92. The company’s deal to buy BP’s $7.1 billion stake in Pan American Energy collapsed, 10 days after Argentina’s president ordered oil companies to repatriate export revenue.

Japan Bourse Merger?

The failure of the deal to buy Argentina’s biggest oil exporter means Cnooc may struggle to meet its production growth targets next year, according to Gordon Kwan, Mirae Asset Securities Ltd.’s head of regional energy research in Hong Kong.

Among stocks that advanced, Osaka Securities Exchange Co. climbed 7.3 percent to 391,500 yen in Tokyo, the biggest advance since August. The Nikkei newspaper said Tokyo Stock Exchange Group Inc. entered late-stage takeover talks to buy the bourse operator next year, uniting Japan’s largest markets.

TSE, a privately held company which runs the main venue in the world’s third-largest equity market, would offer to buy as much as 66 percent of Osaka, Nikkei said. Both companies said in separate statements that no decision has been made.

Computershare Ltd., an Australian share registrar, surged 16 percent to A$8.44 in Sydney, the most in seven years, after receiving U.S. antitrust clearance for its purchase of Bank of New York Mellon’s shareowner services unit.

--With assistance from Eleni Himaras in Hong Kong. Editors: Nick Gentle, John McCluskey

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