Bloomberg News

Asia Stocks Fall by Most in Six Weeks on Greece Policy Confusion

November 07, 2011

Nov. 5 (Bloomberg) -- Asia stocks fell, with the regional benchmark index recording its biggest weekly retreat in six weeks, as political wrangling in Greece put a European rescue package in doubt and China’s manufacturing growth slowed.

BHP Billiton Ltd., the world’s largest mining company, was the biggest drag on the MSCI Asia Pacific Index as commodity prices dropped and staff at three of its mines threatened to strike. OneSteel Limited, a Sydney-based steel manufacturer, fell the most on the index this week dropping 24 percent on lower than expected earnings. Toyota Motor Corp. led exporters lower, dropping 3 percent on concern that renewed uncertainty about Europe’s debt crisis will damp global demand.

The MSCI Asia Pacific Index declined 3.6 percent to 120.22 this week, its biggest weekly drop since the period ending Sept. 23. Stock prices fell after Greek Prime Minister George Papandreou announced on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on Europe’s rescue pact. He scrapped the plan Nov. 3, the same day the European Central Bank unexpectedly cut interest rates, spurring a regional rally.

“People were naturally skeptical that the resolution agreed last week in Europe was going to bring an end to the volatility in markets, and that’s clearly the case with what we’ve seen,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The deteriorating global economic growth indicators are an increasingly uncertain backdrop.”

The Asian benchmark’s drop pared last week’s rally. The index had surged 7.5 percent on the news of the European aid plan for Greece. Stocks have retreated this year as Europe’s smoldering debt crisis, stuttering U.S. growth and tighter monetary policy in China damped the outlook for earnings.

Regional Indexes

Indexes across Asia fell on the news of the planned Greek referendum. Japan’s Nikkei 225 Stock Average fell 2.75 percent, South Korea’s Kospi Index dipped 0.16 percent and Singapore’s Straits Times Index fell 1.67 percent. Australia’s S&P/ASX 200 fell 1.7 percent. Hong Kong’s Hang Seng Index dropped 1.1 percent after the city’s home sales slid.

The Shanghai Composite Index was the only major benchmark in Asia with a gain this week, rising 2.2 percent on speculation the government will accelerate measures to boost the economy after a report on non-manufacturing industries signaled tight monetary policies are hurting businesses.

BHP fell 1.9 percent to A$37.95 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, retreated 3 percent to HK$19.44 in Hong Kong.

Metals Prices

The London Metal Exchange Index of prices for six metals, including copper and aluminum fell as much as 3.46 percent on the week, paring last week’s gain of 10.5 percent.

Australian banks also pulled the index lower this week amid renewed concern that Europe’s leaders will be unable to contain the sovereign-debt crisis. The Reserve Bank of Australia cut its forecasts for the country’s economic growth and inflation for the next two years in a statement Nov. 4 and reduced official interest rates on Nov. 1.

Australia & New Zealand Banking Group, the country’s fourth-largest lender by market value, dropped 4.8 percent to A$21.02 and Westpac Banking Corp., the No. 2, slipped 2.7 percent to A$22.08.

OneSteel plummeted 24 percent to 97 Australian cents when it cut its first-half profit forecast on lower iron ore prices and gains in the local currency. Sony Corp. dropped 18.1 percent to 1,400 yen after forecasting a full-year loss because of a strong yen, waning TV sales and flooding in Thailand that has affected production.

Of the 430 companies in the Asia-Pacific index that reported results from Oct. 11 through 6 p.m. on Nov. 4 in Hong Kong, 205 missed analysts’ estimates, while 151 exceeded expectations, according to data compiled by Bloomberg.

Growth Outlook

Exporters retreated as the U.S. Federal Reserve cut the outlook for growth in the world largest economy for next year and predicted unemployment will average 8.5 percent to 8.7 percent in the final quarter of 2012.

Toyota fell 3 percent to 2,552 yen. Canon Inc. dropped 2.2 percent to 3,485 yen and Li & Fung Ltd. retreated 2.2 percent to HK$15.22. James Hardie Industries SE, an Australian supplier of home siding that receives 68 percent of sales from the U.S., dropped 3.7 percent to A$6.08 in Sydney.

The MSCI Asia Pacific Index declined 12.7 percent this year through yesterday, compared with a 0.4 percent drop by the S&P 500 and a 13.1 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 12.8 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600.

--Editors: Nick Gentle, Paul Tighe

-0- Nov/04/2011 10:16 GMT

-0- Nov/04/2011 21:38 GMT

To contact the reporter on this story: Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

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


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