Bloomberg News

Most Asia Stocks Drop on Concern China Won’t Ease Policy

August 20, 2012

Most Asian Stocks Rise on U.S. Confidence Data, ECB Bond Plan

The MSCI Asia Pacific Index was little changed at 120.78 as of 9:25 a.m. in Tokyo. Photographer: Jason Alden/Bloomberg

Most Asian stocks fell as concern that China won’t ease monetary policy even amid slowing economic growth and lower earnings offset optimism for the global outlook after U.S. consumer confidence improved.

China Pacific Insurance (Group) Co. (2601), the nation’s third- largest insurer, slid 1.2 percent in Hong Kong after its profit slumped. Country Garden Holdings Co., a Chinese builder of apartments, fell 1.1 percent as rising house prices sparked concern China will tighten property curbs. LG Innotek, a cellular phone parts maker, climbed 6.1 percent in Seoul after a report that sales of its camera modules will grow.

The MSCI Asia Pacific Index (MXAP) slid 0.1 percent to 120.67 as of 7:34 p.m. in Tokyo, with eight stocks falling for every seven that rose. China has no intention of cutting banks’ reserve requirements in the short term, as suggested by a cash injection last week, according to a weekend commentary in the central bank newspaper Financial News.

“China is still trying to bottom out,” said Khiem Do, the Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. Earnings in Asia “have mostly surprised on the downside rather than the upside. They’ve mostly been fairly disappointing. U.S. surprises tend to be the driver of equity markets around the world.”

Of the 429 companies in the Asia-Pacific index that have reported quarterly earnings since July 1, and for which Bloomberg has estimates, about 55 percent have failed to meet projections, according to data compiled by Bloomberg. The measure completed a third straight week of advance last week, the longest streak since March, amid optimism policy makers would take more measures to promote growth.

Nikkei, Kospi

Japan’s Nikkei 225 Stock Average rose 0.1 percent. South Korea’s Kospi Index was little changed, while Australia’s S&P/ASX 200 Index (AS51) fell 0.1 percent.

Hong Kong’s Hang Seng Index slid 0.1 percent and China’s Shanghai Composite Index declined 0.4 percent.

Markets in Singapore, Indonesia, Philippines and Malaysia are shut for holidays.

The Asian regional benchmark index, which includes companies from emerging countries, retreated 6.4 percent from a Feb. 29 high through last week amid concern China’s economy is slowing and Europe’s debt crisis is deepening. Stocks on the measure were valued at 12.6 times estimated earnings on average, compared with 13.7 times for the Standard & Poor’s 500 Index and 11.7 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Consumer Confidence

Futures on the Standard & Poor’s 500 Index were little changed today. The underlying gauge is less than one point away from a four-year peak of 1,419.04 set on April 2. The Dow Jones Industrial Average last week added 67.25 points, or 0.5 percent, to 13,275.20. On the last day of trading, it touched the highest level since December 2007.

Confidence among U.S. consumers unexpectedly improved in August, boosting the prospect of stronger household spending this quarter, according to Thomson Reuters/University of Michigan preliminary index of consumer sentiment.

Europe’s leaders meet this week to discuss ways to combat the region’s debt crisis.

Luxembourg Prime Minister Jean-Claude Juncker, who also heads the group of euro-area finance ministers, will discuss a request by Greece Prime Minister Antonis Samaras for a two-year extension to the indebted nation’s fiscal adjustment program when he visits Athens on Aug. 22. Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Home Prices

In China, new-home prices climbed in July from a month earlier in 49 of 70 cities tracked by the government, the National Bureau of Statistics said on its website on Aug. 18. That was the most since May last year and compared with 25 cities in June.

“A rebound in property prices is bad for the economy as the government will refrain from conducting further policy easing,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “Investor sentiment is bad and the market will test new lows.”

Country Garden fell 1.1 percent to HK$2.71 in Hong Kong, while Guangzhou R&F Properties Ltd., a developer in the southern Chinese city, retreated 2.1 percent to HK$9.15.

China Pacific Insurance fell 1.2 percent to HK$24.90 in Hong Kong after saying its first-half profit slumped 55 percent from a year earlier as investment income fell and premiums expansion slowed.

Rare Earths

Lynas Corp., an Australian miner of rare-earth minerals, slumped 6.7 percent to 70 Australian cents in Sydney after JPMorgan Chase & Co. cut its rating on the stock to neutral from overweight.

China’s rare-earth producers also fell after China Securities Journal reported the government is studying a price- based resource tax on the mineral and may raise the levy. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111), China’s biggest producer of rare earths, slid 1.7 percent to 37 yuan in Shanghai.

Sharp Corp., Japan’s biggest maker of liquid-crystal displays, fell 5.4 percent to 174 yen after the Mainichi newspaper reported the company may cut 10,000 jobs, or about 20 percent of its workforce, without citing anyone. Sharp isn’t considering additional job cuts, Miyuki Nakayama, a spokeswoman, said today.

Among stocks that rose, LG Innotek climbed 6.1 percent to 95,400 won in Seoul. Taurus Investment said sales at Innotek’s camera module division will rise to 401 billion won ($354 million) in the third quarter and 470 billion won in the fourth, compared with 328 billion won in the second quarter, as clients roll out new mobile phone models.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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


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