Bloomberg News

Asian Stocks Outside Japan Drop; Election Spurs Nikkei 225 Rally

November 16, 2012

Asian stocks outside Japan declined this week as companies including QBE (QBE) Insurance Group Ltd. and Tencent Holdings Ltd. warned of slower earnings growth. Japanese shares rose ahead of next month’s elections.

QBE Insurance fell 15 percent in Sydney after Australia’s biggest insurer said claims from U.S. superstorm Sandy will dent full-year profit. Tencent slid 7 percent in Hong Kong as the operator of online games said revenue growth will slow after reporting profit that missed estimates. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, rose 3.1 percent in Tokyo on speculation the elections will hand power to an opposition party advocating more aggressive monetary easing.

The MSCI Asia Pacific Excluding Japan Index (MXAPJ) dropped 1.2 percent this week, trimming to 10 percent the gauge’s gain through yesterday from this year’s low on June 4 as central banks added stimulus to spur economic growth and data showed a slowdown in China may be ending.

“Confidence is crucial,” said Jing Ulrich, Hong Kong- based chairwoman of global markets at the China division of JPMorgan Chase & Co. “The economy is beginning to stabilize. Maybe in the coming few months we’ll see corporate earnings recover. We are already seeing signs of recovery in things like power generation, retail sales, industrial production and surprisingly Chinese exports have performed better than expected.”

Australia’s S&P/ASX 200 Index (AS51) decreased 2.8 percent this week. South Korea’s Kospi Index dropped 2.3 percent. Taiwan’s Taiex Index slipped 2.2 percent. Hong Kong’s Hang Seng Index fell 1.1 percent.

Leadership Change

The Shanghai Composite slid 2.6 percent this week. The Communist Party appointed Xi Jinping general secretary on Nov. 15, putting him in line to become president, while Vice Premier Li Keqiang is forecast to replace Premier Wen Jiabao.

“A lot of China’s leaders are new and there’s been little coverage on their current positions,” said Tim Leung, a portfolio manager who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. “I’m quite sure in the longer term we will notice the change, but it’s very difficult to make predictions at this point.”

Japan’s Nikkei 225 Stock Average advanced 3 percent. Prime Minister Yoshihiko Noda dissolved parliament yesterday, triggering an election on Dec. 16 that polls suggest his Democratic Party of Japan will lose.

Shinzo Abe, the leader of the main opposition Liberal Democratic Party, called on Nov. 16 for the central bank to pursue unlimited monetary stimulus to end deflation and revive an economy that shrank last quarter at the fastest pace since the 2011 earthquake.

QBE, Noble

Of the 555 companies in the MSCI Asia Pacific Index that posted quarterly results since Oct. 1, for which estimates were available, 55 percent missed expectations, according to data compiled by Bloomberg News. Shares on the Asian benchmark index traded at 13.2 times estimated earnings, compared with 13.1 times for the S&P 500 Index and 11.8 times for the Stoxx Europe 600.

QBE plunged 15 percent to A$10.91 in Sydney. Moody’s Investor Service put the insurer’s credit rating on review for a possible downgrade after the company said its profit margin will drop to around 8 percent this year. That’s down from an August forecast for better than 12 percent, as losses from superstorm Sandy total $350 million to $450 million.

Lynas, Noble

Lynas Corp. (LYC), which is building the world’s biggest rare- earths refinery in Malaysia, tumbled 31 percent to 55.5 Australian cents. The stock will be removed from MSCI Australia Index effective Nov. 30 and Malaysian activists appealed against a court decision allowing the company to proceed with its project in the Southeast Asian nation.

Noble Group Ltd. sank 9.8 percent to S$1.06 in Singapore after Vice Chairman Emeritus Harindarpal Singh Banga sold a 3.5 percent stake in the commodity supplier that reported lower- than-expected earnings last week.

Tencent sank 7 percent to HK$248.20 in Hong Kong after Chief Executive Officer Pony Ma said China’s decelerating economy may slow revenue growth rates for online advertising. The company, which received 7 percent of sales from advertising in 2011, posted profit that missed analyst estimates.

Japanese banks advanced ahead of elections. The lenders are the best way to bet on a return of the LDP to power, Bank of America Corp. strategist Michael Hartnett wrote in a report yesterday. Mizuho Financial Group Inc. climbed 4.1 percent to 128 yen. Mitsubishi UFJ Financial gained 3.1 percent to 366 yen.

Brokerages and carmakers led gains as the Topix Index, Japan’s broadest measure of equity performance, climbed 2.8 percent for the week. Toyota Motor Corp. advanced 5.9 percent to 3,325 yen. Daiwa Securities Group Inc. surged 13 percent to 348 yen.

The Nikkei Stock Average Volatility Index, a gauge of how much it costs to buy options protecting against swings in the country’s main stock-price measure, fell on Nov. 14 to the lowest since before last year’s record earthquake.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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