Bloomberg News

Asia Stocks Erase Month’s Gain as Results Highlight Economic Woe

October 26, 2012

Asian stocks fell this week, with the regional index erasing the month’s gains, as companies including Fanuc (6954) Corp. and China Unicom (Hong Kong) Ltd. reported earnings that missed estimates amid global growth concerns.

Fanuc, a maker of industrial robots, slid 5.4 percent in Tokyo, while China Unicom, that nation’s No. 2 mobile-phone company, sank 5.8 percent in Hong Kong. Tohoku Electric Power Co. plunged 21 percent, leading declines among Japanese utilities on concern higher fuel prices will crimp earnings. Jupiter Telecommunications Co. jumped 31 percent in Osaka as KDDI Corp. and Sumitomo Corp. offered as much as 216 billion yen ($2.7 billion) to buy the rest of the company.

The MSCI Asia Pacific Index fell 1.6 percent this week to 121.54, paring the measure’s rebound from a June 4 low to less than 12 percent. Shares had risen as central banks in Europe, the U.S., and China added stimulus to prop up growth.

“External factors such as the European debt crisis and the U.S. elections are still the biggest risks for the market,” said Angus Gluskie, managing director at White Funds Management in Sydney, which manages more than $350 million. “Earnings are hostage to these macroeconomic factors.”

The MSCI Asia Pacific Index traded at 12.9 times estimated earnings on average, compared with 13.5 for the Standard & Poor’s 500 Index and 12.1 for the Stoxx Europe 600 Index.

Japan’s Nikkei 225 Stock Average (NKY) dropped 0.8 percent even as the yen closed on Oct. 25 at below 80 to the dollar for the first time since June.

Rally Snapped

Hong Kong’s Hang Seng Index was little changed for the week after snapping on Oct. 26 its longest streak of gains since 2006. Taiwan’s Taiex Index slid 3.7 percent, China’s Shanghai Composite Index dropped 2.9 percent and Australia’s S&P/ASX 200 Index (AS51) retreated 2.2 percent.

“Earnings in Hong Kong and China have not been so good, but most of the rally is being driven by expectation that growth is bottoming in China,” said Binay Chandgothia, a Hong Kong- based portfolio manager at Principal Global Investors, which oversees $250 billion. “In order to see the rally move up further, you’re going to need stronger economic growth or you need the corporate sector to show better profitability. Otherwise, you might just see a period of consolidation.”

South Korea’s Kospi Index sank 2.7 percent after Bank of Korea data Oct. 25 showed the nation’s gross domestic product expanded 1.6 percent in the three months to September from a year earlier, the slowest pace in three years.

U.S. Stocks

In the U.S. the S&P 500 fell 1.5 percent as companies from 3M Co. to DuPont Co. reported disappointing quarterly results and forecasts. All 10 groups in the S&P 500 fell for the week. DuPont tumbled 8.4 percent after saying it will eliminate about 1,500 jobs amid a smaller-than-estimated profit. 3M plunged 5.3 percent as it reduced its full-year projection.

Of the 134 MSCI Asia Pacific Index (MXAP) members that reported earnings by 5:30 p.m. on Oct. 26, and for which Bloomberg News had estimates, about 58 percent fell short of projections.

Fanuc fell 5.4 percent to 12,570 yen. Net income dropped 9.8 percent from a year earlier to 67 billion yen in the six months ended Sept. 30, missing the company’s 75 billion yen guidance.

Canon Inc., the world’s largest camera maker, fell 3.4 percent to 2,560 yen in Tokyo after cutting its annual profit forecast by 6.4 percent as consumers switch to taking pictures with smartphones.

China Unicom

China Unicom retreated 5.8 percent through the week in Hong Kong after third-quarter net income rose 27 percent to 2.02 billion yuan ($324 million). The result, derived from nine-month earnings reported by the Beijing-based company, compares with the 2.21 billion-yuan median estimate in a Bloomberg News survey.

Among stocks that rose after reporting earnings, Macquarie Group Ltd. (MQG), Australia’s largest investment bank, advanced 3.5 percent to A$30.85 after saying its first-half profit increased 18 percent from a year earlier on increased earnings from its fixed-income, currency and commodity trading businesses.

Jupiter Telecommunications soared 31 percent to 108,500 yen. KDDI, Japan’s No. 2 mobile-phone company, and Sumitomo, a trading firm, offered to buy the remaining 21 percent they don’t own at 110,000 yen per share, the companies said in a statement Oct. 24. The offer is 33 percent higher than Jupiter’s price Oct. 19, the last trading day before the Nikkei newspaper published a report about the plan. KDDI rose 4.3 percent and Sumitomo dropped 1.4 percent.

Japanese utilities had six of the 10 biggest declines on the MSCI Asia Pacific Index through the week. Fuel costs for Japan’s nine generators will rise by 3.2 trillion yen to about 6.8 trillion yen in the fiscal year ending March 2013, according to estimates from a government panel. Tohoku Electric plunged 21 percent to 554 yen.

Kansai Electric Power Co., Kyushu Electric Power Co. and Hokkaido Electric Power Co. said they haven’t decided on whether to issue a year-end dividend. The comments followed reports by the Nikkei newspaper that all three are considering skipping the payment. Kansai Electric retreated 13 percent, Kyushu Electric dropped 18 percent, and Hokkaido Electric sank 17 percent.

To contact the reporter on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net

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


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