Bloomberg News

Asian Stocks Retreat Most in Month After S&P Cuts Europe Ratings

January 16, 2012

Jan. 16 (Bloomberg) -- Asian stocks fell ahead of a debt sale today by France after Standard & Poor’s stripped the country of its top credit rating and cut eight other European nations on concern the region hasn’t done enough to contain its debt crisis.

Australia & New Zealand Banking Group Ltd., Australia’s third-largest lender by market value, slid 1.6 percent amid concern Europe’s crisis will hurt the global financial system. Sony Corp., which gets 21 percent of its revenue in Europe, lost 2.3 percent. Guangzhou R&F Properties Company Ltd., a Chinese developer, fell 2.8 percent ahead of a report tomorrow forecast to show China’s economy grew the least in 10 quarters. BYD Co., a Chinese carmaker partially owned by billionaire Warren Buffett, rose 4.8 percent after a newspaper reported China will grant tax exemptions to some electric passenger cars.

The MSCI Asia Pacific Index fell 1.1 percent, the most since Dec. 19, to 115.6 as of 8:36 p.m. in Tokyo after talks between Greek officials and creditors stalled last week, raising the threat of default. About four stocks fell for each that rose in the measure. and all 10 industry groups declined. The measure added 2.2 percent last week.

“It’s unrealistic to expect Europe to make progress in dealing with debt issues in a straight line without having hiccups,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. S&P’s ratings downgrades are “not going to help investor sentiment.”

Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The index lost 0.5 percent in New York on Jan. 13. After the market closed, S&P said it downgraded France, while Germany had its credit rating affirmed.

S&P Downgrades

Japan’s Nikkei 225 Stock Average fell 1.4 percent even after a report showed the nation’s machine orders in November surged the most since January 2008.

Australia’s S&P/ASX 200 slid 1.2 percent, while South Korea’s Kospi Index lost 0.9 percent. Hong Kong’s Hang Seng Index fell 1 percent. Taiwan’s Taiex Index retreated 1.1 percent even after Taiwanese President Ma Ying-jeou, a booster of closer ties with China, was re-elected.

Germany, Belgium, Estonia, Finland, Ireland, Luxembourg and the Netherlands had their ratings affirmed by S&P as France lost its AAA rating. France was cut to AA+ with a negative outlook, S&P said in a statement. Cyprus, Italy, Portugal and Spain were cut two grades, S&P said. The long-term ratings on Austria, Malta, Slovakia and Slovenia were also cut.

Banks, Exporters Fall

Financial companies contributed the most to the decline in the MSCI Asia Pacific Index before France sells as much as 8.7 billion euros ($11 billion) of bills today, followed by Spain’s and Greece’s bill sales tomorrow. Australia & New Zealand Banking Group lost 1.6 percent to A$20.86. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, fell 2.7 percent to 325 yen. HSBC Holdings Plc, Europe’s biggest lender, lost 0.8 percent to HK$59.65.

Exporters to Europe dropped after the euro touched 97.04 yen today, the lowest price since November 2000. A weaker euro erodes the value of Asian exporters’ sales to the region. Sony slid 2.3 percent to 1,297 yen. Canon Inc., a Japanese camera maker that generates about a third of its sales in Europe, declined 2.2 percent to 3,280 yen. Hutchison Whampoa Ltd., an operator of retail chains and ports that gets 53 percent of its revenue in Europe, slid 1.5 percent to HK$67.25.

The MSCI Asia Pacific Index advanced 2.7 percent this year through Jan. 13, compared with a 2.5 percent gain by the S&P 500 and a 1.9 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.3 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10 times for the Stoxx 600.

China Stocks

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 1.7 percent. Gross domestic product, the value of all goods and services produced in the economy, probably rose 8.7 percent from a year earlier, the slowest pace since the second quarter of 2009, according to the median forecast of 26 economists surveyed by Bloomberg News.

The data, plus indicators for investment, retail sales and industrial production, will be released tomorrow in Beijing.

“Private sectors, especially the property sector, have caused a slowdown, which they seem to be happy about,” Patkar at Platypus Asset Management said, referring to policy makers in Beijing. “They have the ability and willingness to support growth in 2012, so I see it as less of a concern from an investor sentiment point of view.”

Guangzhou R&F Properties Co. fell 2.8 percent to HK$6.70. Country Garden Holdings Co., a real estate developer, slid 5.2 percent to HK$3.13 in Hong Kong.

Electric Cars

BYD Co. gained 4.8 percent to HK$21.80 after rising as much as 6.7 percent. China announced the first batch of electric passenger cars that will be exempt from vehicle and vessel taxes, People’s Daily reported, citing a government statement. BYD was the worst performer last year on the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong, falling 59 percent.

China Southern Airlines Co., the No. 1 carrier by passengers, fell 8.6 percent to HK$3.95 after Citigroup Inc. cut its investment rating on the firm to “sell” from “buy.” The stock dropped the most on the MSCI Asia Pacific Index. Air China Ltd., the world’s biggest carrier by market value, dropped 5.1 percent to HK$5.83.

--Editors: Nick Gentle, Jason Clenfield

To contact the reporter on this story: 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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