Bloomberg News

Asian Stocks Fall Second Week This Month on China, Europe

July 27, 2012

Asian stocks fell, with the regional benchmark index paring last week’s gains, amid concern Greece may not meet bailout targets and after the International Monetary Fund said China’s economy faces significant downside risks.

Hutchison Whampoa Ltd. (13), an operator of ports and retail chains that gets 55 percent of its revenue in Europe, fell 3.8 percent in Hong Kong. Gome Electrical Appliances Holding Ltd., China’s second-biggest electronics retailer, plunged 23 percent to an all-time low after forecasting a first-half loss. Hon Hai Precision Industry Co., the assembler of Apple Inc. (AAPL:US)’s iPhones and iPads, sank 6.8 percent in Taipei after Apple posted earnings that missed estimates.

The MSCI Asia Pacific Index dropped 0.6 percent to 115.92 this week. The gauge has fallen more than 10 percent since this year’s high on Feb. 29 amid concern the global economic slowdown is deepening and after Greek leaders failed to agree on an 11.5 billion euro ($14 billion) package of budget cuts pledged to get bailout funds, adding to signs Europe’s debt crisis is worsening. Greece’s politicians will meet again on July 30.

“Signals coming out of Greece are not positive in terms of implementing agreements, and so Europe is going to remain a key negative for markets for quite some time to come,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook remains very difficult for major economies and therefore for equity markets.”

Market Intervention

Stocks advanced yesterday after European Central Bank President Mario Draghi said policy makers will do whatever is needed to preserve the euro and were prepared to intervene in bond markets as yields surged in Spain and Italy.

Japan’s Nikkei 225 Stock Average (NKY) declined 1.2 percent. Hong Kong’s Hang Seng Index retreated 1.9 percent. The Shanghai Composite Index decreased 1.8 percent. Australia’s S&P/ASX 200 Index and South Korea’s Kospi Index both added 0.3 percent.

The losses in the MSCI Asia Pacific Index dragged the value of shares on the regional gauge to 11.8 times estimated earnings, compared with 13.5 times for the Standard & Poor’s 500 Index and 11.0 times for the Stoxx Europe 600 Index (SXXP), according to data compiled by Bloomberg.

Of the 1,007 companies on the MSCI Asia Pacific Index, about 35 percent have price-to-book ratios of less than one, according to data compiled by Bloomberg. Those companies include Hutchison Whampoa, Japan’s Toyota Motor Corp. and Australia’s Qantas Airways Ltd. A value below one means a company can be bought for less than the value of its assets.

‘Investors Run’

“Investors continue to run away from Europe,” said Goya Nakao, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which oversees about 5 trillion yen ($64 billion. “Stocks and sectors that are highly dependent on external demand just keep falling. Sentiment has deteriorated so much that investors are ignoring cheap valuations and selling to cut their losses.”

Companies that rely on Europe fell as investors awaited the outcome of July 30 talks between Greek Prime Minister Antonis Samaras and his coalition partners to determine the savings needed to receive the funds pledged under two bailout packages totaling 240 billion euros.

Hutchison Whampoa slid 3.8 percent to HK$68.60. HSBC Holdings Plc (5), Europe’s biggest lender by market value, declined 4.1 percent to HK$64.15.

Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in Europe, sank 12 percent to 2,518 yen in Tokyo. The company on July 25 announced it was cutting its full-year profit forecast because of the strong yen and expectations for weaker global growth.

Crisis Spreads

Eastern European economies will expand at half last year’s pace in 2012 as fallout from the euro-area debt crisis spreads, the European Bank for Reconstruction and Development said on July 25. Achieving a “soft landing” is a key challenge for China amid the deteriorating external environment, the IMF said on the same day.

Chow Tai Fook Jewellery Group Ltd. (1929), a Hong Kong-based jewelry retail chain that gets more sales than Tiffany & Co., slipped 6.3 percent to HK$8.62. Belle International Holdings Ltd., the biggest retailer of women’s shoes in China, lost 2.6 percent to HK$13.36.

Gome Electrical Appliances tumbled 23 percent to a record low of 61 Hong Kong cents after forecasting a first-half loss on lower sales and losses at its e-commerce unit. The retailer reported an 88 percent profit decline in the first quarter as China stopped subsidizing some home appliance purchases.

About 52 percent of the 134 companies listed on the Asia- Pacific index that have reported quarterly results this month have missed analysts’ estimates, according to data compiled by Bloomberg.

Apple Suppliers

Apple suppliers fell across the region after the world’s most valuable tech company posted profit and sales that missed (AAPL:US) projections as customers held off on iPhone purchases while waiting for a new handset to be introduced later in the year.

Hon Hai sank 6.8 percent to NT$83.50. Catcher Technology Co. (2474), which manufactures casings for the iPhone, slid 5.8 percent to NT$162.50 in Taipei. Toshiba Corp., a supplier of chips for Apple’s iPad, slumped 9.8 percent to 257 yen in Tokyo.

Among stocks that advanced, Samsung Electronics Co. (005930), the world’s biggest mobile-phone maker by revenue, rose 3.5 percent to 1.233 million won in Seoul. The company forecast higher demand in emerging markets for its panel displays and handsets. Second-quarter net income rose 48 percent to a record 5.19 trillion won ($4.5 billion), missing analysts’ estimates.

Fraser & Neave Ltd., a real estate company and beverage maker, climbed 6.1 percent to S$8.40 amid speculation Heineken NV may be forced to raise its S$50 per share offer for Asia Pacific Breweries Ltd., the maker of Tiger beer and distributor of Heineken in Asia. APB, which is owned 40 percent by F&N and 42 percent by Heineken, jumped 3.1 percent to S$50.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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


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