Bloomberg News

Asian Stocks Pare Losses as China Data Beats Extimates

November 09, 2012

Asian stocks fell, with the regional benchmark index headed for the biggest two-day loss in two months, as companies cut forecasts and Australia’s central bank trimmed its national growth outlook. Shares pared losses after data added to signs China’s economy is bottoming.

Nexon Co., a developer of online games, slumped 16 percent in Tokyo after cutting its net-income forecast. Emeco Holdings Ltd., a mining-equipment maker, plunged 17 percent in Sydney after reducing its profit target. National Australia Bank Ltd. (NAB), the nation’s fourth-biggest lender by market value, dropped 0.7 percent in Sydney. Chinese developer Guangzhou R&F Properties Company Ltd. rose 1.6 percent in Hong Kong.

The MSCI Asia Pacific Index fell 0.3 percent to 121.41 as of 5:15 p.m. in Tokyo after dropping as much as 0.8 percent, with about two stocks sliding for each that gained. The gauge has declined 1 percent this week as China’s Communist Party meets in Beijing to choose new leaders.

“The underlying theme in the market has been the weakness of the real economy,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees about 15 trillion yen ($189 billion). “Maybe the economy is bad enough to require policy response, not only from the U.S. but also from elsewhere. This is an awkward time for Chinese policy makers to take measures to support the economy because such projects are intertwined with politics.”

Slowdown, Stimulus

The MSCI Asia Pacific gauge gained 12 percent through yesterday from this year’s low on June 4 as central banks added stimulus to spur growth and data showed a slowdown in China may be bottoming. The index traded at 13.3 times estimated earnings as of today, compared with 13.2 for the Standard & Poor’s 500 Index and 12.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Of the 502 companies on the Asia-Pacific’s benchmark index that have reported earnings since Oct. 1 and for which estimates are available, 55 percent missed expectations, according to data compiled by Bloomberg.

Nexon slumped 16 percent to 766 yen after cutting its projection for fiscal-year operating profit. Sumitomo Rubber Industries Ltd. dropped 6.7 percent to 868 yen after the tiremaker cut its sales outlook.

Australia’s S&P/ASX 200 Index (AS51) declined 0.5 percent as the central bank reduced its 2013 economic growth forecast, citing lower investment in iron-ore, coal and natural-gas projects as well as the government’s pledge to deliver an election-year budget surplus.

Emeco Slumps

National Australia Bank dropped 0.7 percent to A$23.81. Emeco plunged 17 percent to 51.5 Australian cents after cutting its first-half operating profit target on lower domestic demand.

South Korea’s Kospi Index dropped 0.5 percent as the nation’s central bank kept its key interest rate unchanged today. Japan’s Nikkei 225 Stock Average (NKY) fell 0.9 percent. New Zealand’s NZX 50 Index rose 0.1 percent in Wellington, and Taiwan’s Taiex Index (TWSE) gained 0.7 percent.

Singapore’s Straits Times Index slid 0.1 percent. Hong Kong’s Hang Seng Index dropped 0.9 percent and the Shanghai Composite Index fell 0.1 percent. The BSE India Sensitive Index lost 0.9 percent.

Futures on the S&P 500 swung between gains and losses today. The index dropped 1.2 percent yesterday for the biggest two-day decline in a year amid concern over the so-called fiscal cliff, a series of tax increases and federal spending cuts set to kick in automatically unless Congress acts.

Stocks pared losses as data today showed China’s factory output and retail sales exceeded forecasts and inflation cooled to the slowest pace in 33 months. China’s ruling party yesterday started a week-long meeting to choose its fifth generation of leaders amid signs that the economy is recovering from a seven- quarter slowdown.

Sustainable Rebound?

The data is “pointing to an economy that’s improving and bottoming out, but the point is how significantly it can rebound and how sustainably it can rebound,” said Ben Kwong, chief operating officer at KGI Asia Ltd., a Hong Kong-based brokerage. “Inflation is still moderate, and that will allow the government room to manage the economy if there are signs it’s weakening again.”

Chinese developers were mixed with Guangzhou R&F rising 1.6 percent to HK$10.12. China Overseas Land & Investment Ltd. declined 1.2 percent to HK$20.75.

To contact the reporter on this story: 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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