Bloomberg News

Asia Stocks Cap First Monthly Slide Since May on Growth

August 31, 2012

Asian stocks fell this week, dragging the regional benchmark index to its first monthly drop since May, as reports from Japan, China and South Korea signaled an economic slowdown is deepening.

Samsung Electronics Co. dropped 3.3 percent this week in Seoul after a U.S. jury ruled that the world’s No. 1 maker of smartphones infringed Apple Inc. patents. Shikoku Electric Power Co. (9507), a Japanese regional utility, sank 18 percent, leading other power producers lower after forecasting a first-half loss and after Credit Suisse Group AG rated the company underperform. China Southern Airlines Co. fell 7.8 percent in Hong Kong as Asia’s biggest carrier by passenger numbers reported first-half profit tumbled.

The MSCI Asia Pacific Index (MXAP) slid 2.1 percent to 117.75 this week, its second-straight loss and its biggest drop since the five days ended July 13. Through yesterday, the Asia-Pacific benchmark retreated 8.7 percent from a Feb. 29 high amid concern Europe’s debt crisis is deepening and China’s economy is slowing.

“A tug of war is being seen in the markets,” said Seiichiro Iwamoto, who helps oversee about $34 billion at Mizuho Asset Management Co. in Tokyo. “Investors are groping for reasons to trade shares with few catalysts available. The economy is deteriorating globally, including in China, boosting expectations countries will take stimulus measures to support the markets.”

Stocks on the index, which includes companies from emerging countries, were valued at 12.3 times estimated earnings on average, compared with about 13.6 times for the Standard & Poor’s 500 Index and 11.6 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Regional Measures

Japan’s Nikkei 225 Stock Average (NKY) sank 2.5 percent this week, after the government downgraded its assessment of the economy on Aug. 28. The government lowered its economic evaluation of the U.S., Europe, China, the rest of Asia except India, and said Japan’s overseas shipments are “growing weaker.

Retail sales in the nation fell more than estimated in July, while industrial production unexpectedly dropped. Consumer prices fell 0.3 percent from a year earlier last month, pointing to little progress in the fight against deflation.

China’s Shanghai Composite Index fell 2.1 percent, while Hong Kong’s Hang Seng Index (HSI) slid 2 percent after a government report showed Aug. 27 profit at Chinese industrial companies dropped in July by the most this year.

Business Confidence

South Korea’s Kospi Index declined 0.8 percent after industrial production fell for a second month in July, and after a report showed on Aug. 30 confidence among the country’s manufacturers stood near the lowest level since the global financial crisis.

Taiwan’s Taiex Index slipped 1.1 percent. Australia’s S&P/ASX 200 Index and Singapore’s Straits Times Index (FSSTI) both fell 0.8 percent.

Shares also declined as investors waited for hints of further easing in speech by Federal Reserve Chairman Ben S. Bernanke yesterday to a meeting of central bankers in Jackson Hole, Wyoming. Bernanke said he wouldn’t rule out more stimulus to lower a jobless rate he described as a ‘‘grave concern.”

“There’s no fundamental basis in doing another quantitative easing,” Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management (Asia) Ltd., said before Bernanke’s speech. Baring Asset oversees about $8 billion. “The U.S. economy has pretty good momentum.”

Samsung Electronics fell 3.3 percent to 1.233 million won in Seoul after a U.S. court ordered the South Korean company to pay more than $1 billion for infringing Apple Inc.’s patents for mobile devices.

Japan Utilities

Shikoku Electric plunged 18 percent to 951 yen in Tokyo after forecasting a net loss of 18 billion yen ($229.4 million) for the six months ending September. Credit Suisse rated the company underperform, and also cut its rating on Chubu Electric Power Co. and Kansai Electric Power Co., to neutral from outperform, citing high dependence on nuclear power and concerns about dividend payouts.

Chubu Electric dropped 10 percent to 930 yen, while Kansai Electric tumbled 16 percent to 584 yen. Four of the top 10 declines in the MSCI Asia Pacific Index were Japanese utilities this week.

China Southern Airlines slumped 7.8 percent to HK$3.29 in Hong Kong after its first-half profit slumped 85 percent from a year earlier to 424 million yuan ($67 million). The result missed analysts estimates as a deepening economic slowdown sapped travel demand and fuel costs increased.

PT Bumi Resources, a coal exporter, sank 26 percent to 700 rupiah in Jakarta after posting a first-half loss and an investment company failed to repay $231 million due Aug. 27.

Aozora Payment

Among stocks that rose, Aozora Bank Ltd. (8304), controlled by New York-based private equity firm Cerberus Capital Management LP, surged 15 percent to 233 yen in Tokyo. The lender unveiled a plan to spend 227.6 billion yen to repay a taxpayer bailout over a decade and buy back common stock.

Renesas Electronics Corp. (6723), a Japanese chipmaker, climbed 8.7 percent to 263 yen as a person with knowledge of the matter said New York-based KKR & Co. is in talks to spend about 100 billion yen buying shares of the company. Steve Okun, a Hong Kong-based spokesman for KKR, declined to comment.

KKR will take a controlling stake by the end of the year, the Nikkei newspaper reported earlier, without saying where it got the information. Renesas isn’t the source of the Nikkei report, the company said in a statement to the Tokyo Stock Exchange.

“There’s been doubts about the U.S. recovery momentum and heightened uncertainties in Europe and Asia,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management, which oversees about $165 billion. “If the bad numbers persist, we should see some policy support from governments.”

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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


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