Bloomberg News

Asian Stocks Decline on Doubt Over Spain’s Bailout Plan

June 12, 2012

Asian stocks fell, with the regional benchmark index retreating from a two week high, as surging Spanish bond yields stoked concern that a bailout for the nation’s banks won’t tame the European debt crisis.

Cosco Pacific Ltd., which operates a port in Greece, slid 1.3 percent in Hong Kong. Brilliance China Automotive Holdings Ltd. (1114) dropped 2.6 percent, pacing declines among Chinese carmakers, after the government said vehicle prices dropped in May. Rio Tinto (RIO) Group, the world’s third-largest mining company by market value, lost 1.7 percent in Sydney as copper futures slid.

The MSCI Asia Pacific Index (MXAP) fell 0.5 percent to 112.9 as of 7:22 p.m. in Tokyo, with almost two shares sliding for each that rose. The gauge dropped 12 percent from its peak this year on Feb. 29 through yesterday amid concern economic growth is slowing in China and the U.S. and as Europe’s debt crisis intensified.

“There appears to be plenty of cynicism,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth-management unit. The Swiss bank has about $1.5 trillion in assets under management. “Spain will remain the focus for a few days as markets review all possible outcomes and implications for other troubled euro-zone members. More firewalls will be required for other euro-zone countries.”

Japan’s Nikkei 225 Stock Average (NKY) declined 1 percent, paring losses of as much as 2 percent as the yen fell after the International Monetary Fund said the currency is overvalued. A weaker yen boosts the value of overseas earnings of the nation’s exporters when repatriated.

South Korea’s Kospi Index slid 0.7 percent. Hong Kong’s Hang Seng Index lost 0.4 percent, while China’s Shanghai Composite Index dropped 0.7 percent. Australia’s S&P/ASX 200 Index added 0.2 percent.

Contagion Concerns

Futures on the Standard & Poor’s 500 Index gained 0.6 percent today. The gauge lost 1.3 percent yesterday in New York after climbing as much as 0.7 percent in the first minutes of trading as optimism faded that Spain’s bank bailout plan will contain the European debt crisis.

Spanish bond yields surged the most in four months after the government sought a bailout of 100 billion euros ($125 billion) for its banks. European officials have struggled to control the debt crisis that began in Greece at the end of 2009.

“Contagion concern is still pretty much alive,” Eddie Tam, chief executive officer of Central Asset Investments, said on Bloomberg Television. “We’re staying on the sidelines at least until the Greek election results.”

Close Race

Polls show a June 17 election in Greece may be a close race. An election on May 6 failed to produce a viable governing majority. Syriza party leader Alexis Tsipras has pledged to keep Greece in the euro while scrapping bailout terms in order to end the hardship brought on by austerity. Meanwhile, pro-bailout proponents, such as New Democracy leader Antonis Samaras, have framed the contest as a decision on whether to leave the euro area.

Companies that do business in Europe declined. HSBC Holdings Plc (5), Europe’s biggest lender by market value, slid 0.8 percent to HK$64.35 in Hong Kong. Cosco Pacific Ltd., which operates a port in Greece, fell 1.3 percent to HK$9.86. Nippon Sheet Glass Co., which gets 39 percent of its sales in Europe, sank 3.6 percent to 80 yen in Tokyo.

China’s carmakers fell as passenger-vehicle prices decreased 1.7 percent in May, the most in at least 23 months, according to the Cheng Xiaodong, head of auto-price monitoring unit of the National Development and Reform Commission.

Brilliance, BYD

Brilliance, the partner Bayerische Motoren Werke AG in China, dropped 2.6 percent to HK$7.51. BYD Co. (1211), a maker of electric cars part-owned by Warren Buffett’s Berkshire Hathaway Inc., slid 1.2 percent to HK$15.10.

Automakers are overstocking cars at a time when dealers are pessimistic about their sales prospects, Cheng said. Zhongsheng Group Holdings Ltd. (881), China’s largest publicly traded automobile dealer by revenue, sank 3.6 percent to HK$10.70.

Raw-material producers declined after copper futures fell as much as 1.2 percent and traded near a five month low. Oil dropped for a fourth day after Saudi Arabian Oil Minister Ali al-Naimi said the Organization of Petroleum Exporting Countries may need a higher production quota.

Rio Tinto slipped 1.7 percent to A$54.65. BHP Billiton Ltd., the world’s largest mining company, lost 0.6 percent to A$31.72. Cnooc Ltd., China’s biggest offshore oil producer, fell 0.8 percent to HK$14.52 in Hong Kong.

Qantas Jumps

The MSCI Asia Pacific Index dropped 0.3 percent this year through yesterday, compared with a 4.1 percent advance by the S&P 500 and a 1.1 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 1.2 times book value, compared with 2.1 times for the S&P 500 and 1.3 times for the Stoxx 600, according to data compiled by Bloomberg. A number below one means companies can be bought for less than value of their assets.

Among stocks that advanced, Qantas Airways Ltd. jumped 11 percent to A$1.075 as Australia’s largest carrier hired bankers to help prepare against any potential takeover bid after the company lost A$1 billion ($1 billion) in market value last week.

Chinese property developers gained after new loans extended by the nation banks in May exceeded analysts’ estimates. China Overseas Land & Investment Ltd., the biggest Chinese homebuilder listed in Hong Kong, climbed 1.4 percent to HK$17.16. Agile Property Holdings Ltd. (3383), the real-estate company partly owned by JPMorgan Chase & Co., increased 3.6 percent to HK$9.90.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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