Bloomberg News

Asian Stocks Drop as China Slowdown Weighs on Earnings

October 10, 2012

Asian Stocks Drop as China Slowdown Weighs on Corporate Earnings

Employees make final inspections for Komatsu Ltd. excavators on the production line of the company's plant in Hirakata City, Osaka. Photographer: Tomohiro Ohsumi/Bloomberg

Asian stocks fell, with the regional benchmark index heading for a one-month low, on concern China’s economic slowdown and its territorial dispute with Japan are weighing on corporate earnings.

Toyota Motor Corp. (7203) slipped 1.9 percent, pacing declines among Japanese carmakers that reported a slump in China sales. Steel & Tube Holdings Ltd. tumbled 8.3 percent in Wellington after iron-ore producer Arrium Ltd. sold its entire 50.3 percent stake in its New Zealand unit at a discount. Korea Electric Power Corp. sank 2.8 percent after Yonhap News agency said the utility’s chief executive officer expects a loss.

The MSCI Asia Pacific Index (MXAP) dropped 0.9 percent to 120.65 as of 7:27 p.m. in Tokyo, headed for its lowest close since Sept. 11. Almost three shares fell for each that rose in the gauge. Alcoa Inc., the largest U.S. aluminum producer, cut its forecast for global consumption of the material as the Chinese economy slows.

“We are clearly seeing the impact of a Chinese slowdown globally and it’s indicated in Alcoa’s numbers,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “Equity markets have had a very strong run, so it won’t be surprising if they go through some correction. In a sense, actually a correction will be healthy.”

Japan’s Nikkei 225 Stock Average (NKY) declined 2 percent for its biggest two-day loss since July 23. South Korea’s Kospi Index slipped 1.6 percent. Australia’s S&P/ASX 200 Index fell 0.3 percent. Hong Kong’s Hang Seng Index slid 0.1 percent, while China’s Shanghai Composite Index added 0.2 percent.

U.S. Futures

Futures on the S&P 500 were little changed today. The gauge fell 1 percent in New York yesterday after the International Monetary Fund cut estimates for global economic growth and as investors awaited quarterly results from Alcoa.

Yesterday marked the five-year anniversary of the S&P 500’s all-time highest close of 1,565.15. The U.S. equity measure lost more than half its value from October 2007 through March 2009, when equity markets bottomed during the global financial crisis. The gauge recovered to close yesterday 7.9 percent below the record level.

Alcoa, typically the first company on the Dow Jones Industrial Average to report earnings, posted a third-quarter loss of $143 million, or 13 cents a share, and warned of slowing demand from China.

Companies that export to China fell. Samsung Electronics Co. (005930), a consumer-electronics maker that counts China as its biggest market, dropped 3.4 percent to 1.325 million won in Seoul. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, dropped 1.9 percent to 897 yen.

Japan Carmakers

Japan’s biggest carmakers extended yesterday’s losses after reporting drops in China sales as rioters torched dealerships and smashed cars in protests sparked by a China-Japan territorial dispute over a group of islands. Honda Motor Co. slid 1.1 percent to 2,334 yen. Toyota fell 1.9 percent to 2,943 yen, with the stock also declining after the company announced a recall of 7.4 million vehicles due to faulty window switches.

The MSCI Asia Pacific Index is heading for its biggest weekly decline since August amid signs of economic slowdown in China and as European nations such as Spain struggle to contain their deficits. The International Monetary Fund said European banks may need to sell as much as $4.5 trillion in assets through 2013 if policy makers fall short of pledges to stem the the debt crisis.

The Asian benchmark equity gauge traded at 12.7 times estimated earnings, compared with 13.7 times for the S&P 500 and 12 times for the Stoxx Europe 600 Index.

Steel & Tube Holdings, a supplier of reinforcing mesh and wire, tumbled 8.3 percent to NZ$2.22 in Wellington. Arrium sold 44.5 million Steel & Tube shares at NZ$2.05 each, or 15 percent lower than yesterday’s closing price.

Indiabulls Drops

Indiabulls Real Estate Ltd. slumped 8 percent to 60.6 rupees in Mumbai after anti-graft activists demanded a probe into deals by the Indian developer and politicians. The company didn’t respond to emails seeking comment.

India Against Corruption earlier accused DLF Ltd., the nation’s largest developer, of giving interest-free loans to Robert Vadra, the son-in-law of ruling Congress party president Sonia Gandhi.

Bangkok Dusit Medical Services Pcl (BGH) dropped 4.6 percent to 104.50 baht. Shareholders are seeking to sell $731 million of the Thai hospital operator’s shares at 104 baht to 107 baht a each, according to a term sheet obtained by Bloomberg News.

Korea Electric fell 2.8 percent to 26,200 won in Seoul. The state-run utility may post a loss of 570 billion won ($511 million) this year, the official Yonhap News agency reported today, citing Chief Executive Officer Kim Joong Kyum. Shareholder KR&C is offering to sell 9.67 million shares at 25,900 won to 26,950 won apiece, according to a term sheet obtained by Bloomberg.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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