Bloomberg News

Asian Stocks Decline as Global Slowdown Erodes Earnings

October 24, 2012

Asian stocks dropped, with the regional benchmark index heading for its fourth straight loss, as the global economic slowdown crimps corporate earnings and after commodities erased this year’s gains.

BHP Billiton Ltd. (BHP), the world’s largest mining company, declined 1.4 percent in Sydney. Kawasaki Heavy (7012) Industries Ltd. sank 5.7 percent in Tokyo after the gas-turbine maker said first-half earnings missed its forecast on slowing sales in China and Europe. Esprit Holdings Ltd. slumped 9.5 percent as the clothier resumed trading in Hong Kong after saying first- quarter sales plummeted and announcing plans to raise HK$5.2 billion ($671 million) in a rights offer.

The MSCI Asia Pacific Index declined 0.4 percent to 122.08 as of 5:48 p.m. in Tokyo, with about two shares falling for each that advanced on the measure. The gauge rose 13 percent from this year’s low on June 4 through yesterday as stimulus measures in the U.S., Japan and China boosted sentiment amid a global slowdown and Europe’s debt crisis. Spain’s recession will worsen in coming months, the nation’s central bank said yesterday.

“Weaker earnings from some of America’s biggest companies, along with a sense that Europe isn’t making good progress on the debt crisis, has shaken investor confidence,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “After the run-up in markets, we’ve seen, technical indicators are pointing to some overheating.”

Relative Strength

The regional benchmark gauge posted its biggest weekly advance in a month last week, with the 14-day relative strength index climbing to 62.7 on Oct. 18, the highest in a month and closer to the 70 level that traders consider as overbought. Shares on the Asian gauge traded at 13 times estimated earnings yesterday, compared with 13.5 for the Standard & Poor’s 500 Index and 12 for the Stoxx Europe 600 Index.

Japan’s Nikkei 225 Stock Average (NKY) fell 0.7 percent, reversing gains of as much as 0.3 percent. South Korea’s Kospi Index slipped 0.7 percent and Australia’s S&P/ASX 200 Index dropped 0.8 percent. Taiwan’s Taiex Index lost 0.3 percent.

China’s Shanghai Composite Index added 0.1 percent, erasing losses of as much as 0.5 percent. A private survey from HSBC Holdings Plc and Markit Economics showed manufacturing output in the world’s second-largest economy may contract at a slower pace this month. Hong Kong’s Hang Seng Index rose 0.3 percent, extending gains for a ninth day, the longest winning streak since June 2010.

Futures on the S&P 500 added 0.3 percent today. The gauge declined 1.4 percent yesterday in New York, the lowest closing level since Sept. 5, amid disappointing earnings results at companies from 3M Co. to DuPont Co.

Commodities Drop

Energy companies and raw-material producers posted the biggest decline among the 10 industry groups in the MSCI Asia Pacific Index. Commodities have erased this year’s advance on speculation that demand for energy, industrial metals and some agricultural products will slump because of the sluggish global economy. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 1.4 percent yesterday in New York.

BHP slipped 1.4 percent to A$34.31 in Sydney. Rio Tinto Group (RIO), the world’s second-largest miner by market value, lost 1 percent A$57.26. Inpex Corp., Japan’s leading energy explorer, slid 2.1 percent to 468,500 yen in Tokyo.

Kawasaki Heavy decreased 5.7 percent to 166 yen. The company said in a preliminary earnings statement that operating profit fell to 10.3 billion yen ($129 million), missing its estimate by 49 percent, in the six months ended Sept. 30.

Posco, Esprit

Posco dropped 1.4 percent to 343,500 won in Seoul after Asia’s third-largest steelmaker cut sales forecast for the third time this year as quarterly profit missed estimates.

Esprit tumbled 9.5 percent to HK$11.26 as trading resumed in Hong Kong following a holiday yesterday. The company on Oct. 22 said sales fell 23 percent in the quarter ended September and that it will offer investors the right to buy one new share at HK$8 each for every two held.

Of the 74 companies on the MSCI Asia Pacific Index (MXAP) that posted quarterly results since Oct. 1, 58 percent missed analyst estimates, according to data compiled by Bloomberg News.

Among stocks that advanced, SK Hynix Inc. climbed 4.1 percent to 24,000 won in Seoul after the world’s second-largest maker of computer memory chips reported its first profitable quarter in four on lower costs and currency gains.

Air China Ltd. jumped 5.9 percent to HK$5.43 after the nation’s biggest carrier by market value scrapped a planned share sale because of “uncertainty.”

UEM Land Holdings Bhd. (ULHB) surged 11 percent to 2.15 ringgit in Kuala Lumpur after the Malaysian property developer signed a deal with Singapore’s Ascendas Land International Pte to jointly develop a 3.7 billion ringgit ($1.2 billion) industrial park in Malaysia.

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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