Bloomberg News

Asian Stocks Drop 2nd Day on Central Bank Disappointment

July 06, 2012

Asian stocks fell for a second day, paring this week’s gain, as sales at Samsung Electronics Co. missed analysts’ estimates and interest-rate cuts in Europe and China failed to boost confidence in the global economy.

Canon Inc. (7751), a Japanese camera maker that gets 31 percent of its sales in Europe, slid 2.5 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, fell 1 percent as investors sold shares of companies with earnings tied to economic growth. Agricultural Bank of China Ltd. led a slide among Chinese banks, dropping 2.5 percent. Parco Co. (8251) climbed 2.5 percent in Tokyo after J Front Retailing Co. said it will buy a majority stake in the rival department-store operator.

The MSCI Asia-Pacific (MXAP) slid 0.5 percent to 118.44 as of 6:57 p.m. in Tokyo. About five shares fell for every three that rose, with technology shares exerting the biggest drag on the index. The gauge has lost 8.2 percent from this year’s high in February amid concern economic growth in China and the U.S. is slowing as Europe’s debt crisis deepens. The measure gained 1.1 percent this week.

“We are still reasonably cautious,” said Tim Riordan, who helps manage $200 million at Parker Asset Management Ltd., a hedge fund in Sydney. “All of these moves by central banks had been expected, so they were baked into the price. ECB rate cuts are getting to the point where each cut is met with diminishing returns.”

South Korea’s Kospi Index (KOSPI) dropped 0.9 percent, led by Samsung, which accounts for 16 percent of the index by weight. The largest maker of televisions and mobile phones reported sales of 47 trillion won ($41 billion), trailing the 49.8 trillion-won average of 35 analysts’ estimates compiled by Bloomberg. The shares lost 2 percent to 1.161 million won.

U.S. Jobs

Japan’s Nikkei 225 Stock Average declined 0.7 percent and the broader Topix Index retreated 0.6 percent. Hong Kong’s Hang Seng Index was little changed, while China’s Shanghai Composite Index surged 1 percent as developers and industrial companies gained. Australia’s S&P/ASX 200 Index slid 0.3 percent.

Singapore’s Straits Times Index gained 0.2 percent, capping eight days of gains, the longest winning streak since April 2011. The last time the index rose for more than eight straight days was in January 2006.

CapitaLand Ltd. jumped 10 percent this week, the most on the city state’s benchmark, on speculation Southeast Asia’s biggest developer will benefit from declining borrowing costs in China, which contributes about 22 percent of the company’s revenue. Golden Agri-Resources Ltd. (GGR), the world’s second-biggest palm oil grower, climbed 7.5 percent through the week as crude palm oil futures rose for a third week in Kuala Lumpur.

Rate Cuts

Futures on the Standard & Poor’s 500 Index slipped 0.2 percent today. The gauge slid 0.5 percent yesterday, halting a three-day advance, amid disappointment over Europe’s efforts to tame the region’s debt crisis and before a U.S. jobs report expected to show the pace of hiring in June remained at less than half the average for the first quarter of the year.

In a 45-minute span yesterday, the ECB and People’s Bank of China cut their benchmark borrowing costs, while the Bank of England raised the size of its asset-purchase program. ECB policy makers refrained from announcing more measures to cap borrowing costs in Italy and Spain.

Some “downside risks to the euro-area economic outlook have materialized,” ECB president Mario Draghi said when lowering the main refinancing rate and the deposit rate by 25 basis points to 0.75 percent and zero respectively.

The International Monetary Fund will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the U.S., Brazil, India and China, Managing Director Christine Lagarde said in a speech in Tokyo today.

Year’s Gain

The MSCI Asia-Pacific gained 4.5 percent this year through yesterday, compared with an 8.8 percent advance by the S&P 500 and a 5.1 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 10.8 times for the Stoxx 600.

Canon lost 2.5 percent to 3,120 yen. Konica Minolta Holdings Inc., a film maker that depends on Europe for more than a quarter of its sales, sank 2.3 percent to 625 yen. Esprit Holdings Ltd., a Hong Kong retailer that makes 79 percent of revenue in debt-stricken Europe, declined 3.9 percent to HK$9.65.

BHP Billiton, the world’s largest mining company, slid 1 percent to A$32.09. Rio Tinto Group, third-biggest, declined 1.5 percent to A$57.80.

Chinese banks trading in Hong Kong declined as Barclays Plc analyst May Yan said the average net income for the industry in 2013 may fall as much as 54 percent following two interest-rate cuts in a month. Agricultural Bank of China declined 2.5 percent to HK$3.11. Bank of Communications Ltd. slid 2.5 percent to HK$5.11.

Parco gained 2.5 percent to 971 yen after J Front offered 1,100 yen per share to become Parco’s majority shareholder.

Trading volume on Japan’s Topix was 7.6 percent below its 30-day average, according to data compiled by Bloomberg. Hang Seng volume was 8.6 percent above its average, the data show.

To contact the reporter on this story: 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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