Asian Equities Decline Amid Signs European Crisis Is Worsening
January 05, 2012, 7:27 PM ESTBy Jonathan Burgos and Satoshi Kawano
Jan. 5 (Bloomberg) -- Asian stocks retreated, snapping a two-day rally, after Australia’s services industry shrank and the euro weakened ahead of France’s plans to sells as much as 8 billion euros ($10.4 billion) of debt today.
Sony Corp., a Japanese electronics maker that gets 21 percent of its sales from Europe, fell 2.2 percent as a weaker euro cut the earnings outlook for exporters. National Australia Bank Ltd. led declines among Australian lenders after a report showed the nation’s services industry contracted in December. Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, slid 1.2 percent after the value of December home sales in Hong Kong plunged 36 percent.
“Problems sparked by the European debt crisis are reigniting and people in the market have reaffirmed that the situation has not changed,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “That’s weakening the euro and hurting exporters with a heavy reliance on Europe.”
The MSCI Asia Pacific Index dropped 0.6 percent to 115.84 as of 4 p.m. in Tokyo, with five stocks falling for every three that rose. The measure climbed 2.4 percent in the first two trading days of this year as manufacturing growth from the U.S., Australia, China and India added to signs the global economy may withstand Europe’s debt crisis.
Japan’s Nikkei 225 Stock Average lost 0.8 percent and Australia’s S&P/ASX 200 Index declined 1.1 percent. South Korea’s Kospi Index fell 0.1 percent, erasing gains of as much as 0.5 percent earlier. China’s Shanghai Composite Index slipped 1 percent. Hong Kong’s Hang Seng Index rose 0.2 percent.
‘Disorderly Default’
Futures on the Standard & Poor’s 500 Index slipped 0.2 percent today. The gauge closed little changed yesterday in New York, paring an earlier loss of as much as 0.7 percent, as improving sales at retailers and carmakers helped offset lower- than-forecast factory orders.
Global stocks declined as UniCredit SpA, Italy’s largest bank, said it will sell new shares in a 7.5 billion-euro ($9.8 billion) offer to strengthen its capital position and Prime Minister Lucas Papademos said Greece is at risk of a “disorderly default.”
“It reminds investors that there isn’t an easy solution to Europe’s problems,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversee the equivalent of $84 billion. “Euro weakness is having an impact on the market today.”
France plans to sell as much as 8 billion euros of debt today in the country’s first test this year of investor appetite for its bonds amid threats of a downgrade of its AAA rating by credit companies. Luxembourg Prime Minister Jean-Claude Juncker said the European Union is facing a recession of unknown scope.
Exporters Drop
Asian exporters declined as the euro dropped toward an 11- year low against the yen and fell to a four-month low against the won. A weaker euro cuts the value of European income at Japanese and South Korean companies when repatriated.
Sony dropped 2.2 percent to 1,373 yen. Canon Inc., a camera maker that depends on Europe for almost a third of its sales, lost 1.2 percent to 3,390 yen. Samsung Electronics Co., the world’s second-largest maker of mobile phones by sales, sank 2.3 percent to 1.055 million won in Seoul.
Australian retailers and banks fell after the services industry contracted for a third straight month. Harvey Norman Holdings Ltd., a retailer of electronics products, lost 1.1 percent to A$1.86. National Australia Bank, the country’s fourth-largest lender by market value, dropped 1.9 percent to A$23.73. Australia & New Zealand Banking Group Ltd. lost 1.3 percent to A$20.74.
Home Sales
Developers in Hong Kong declined after a government report showed home sales in December plunged 36 percent in value from a year earlier, while unit sales tumbled 54 percent.
Sun Hung Kai slipped 1.2 percent to HK$97.70. Cheung Kong Holdings Ltd., the real-estate company partly owned by billionaire Li Ka-shing, dropped 1.3 percent to HK$92.60.
The Asian benchmark index lost 17 percent in 2011 as China took steps to cool its property market and Europe struggled to resolve its debt crisis. The Standard & Poor’s 500 Index broke even for the year and the Stoxx Europe 600 Index dropped 11 percent. Stocks in the Asian gauge were valued at 12.2 times estimated earnings on average as of yesterday, compared with 12.1 times for the S&P 500 and 10 times for the Stoxx 600.
Biggest Decline
Elpida Mermory Inc. tumbled 7.4 percent to 350 yen in Tokyo, the biggest decline on the MSCI Asia Pacific Index. The loss-making chipmaker is seeking $500 million in financial support from other companies as it faces $1.6 billion in bond redemptions and loan payments, the Yumiuri newspaper reported, without saying where it got the information.
TonenGeneral Sekiyu K.K., a Japanese oil refiner, slumped 7.2 percent to 735 yen, extending losses for a second day. The refiner’s biggest shareholder, Exxon Mobil Corp., plans to sell most of its stake in the company, Reuters reported yesterday.
Exxon hasn’t made a decision and doesn’t plan to exit the Japanese market, said Kosuke Kai, a spokesman for ExxonMobile Yugen Kaisha, which holds 50.02 percent of TonenGeneral.
--Editor: John McCluskey
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
