Bloomberg News

Asia Stocks Poised to Halt 12-Day Rally; Japan Advances

December 17, 2012

Asian stocks fell, with the regional benchmark index poised to snap its longest rally since 2004, as suppliers to Apple Inc. (AAPL:US) dropped. Losses were limited as Japanese shares jumped after a party that backs more economic stimulus returned to power.

Hon Hai Precision Industry Co. fell 4.7 percent in Taipei, pacing losses among suppliers to Apple, which had its rating cut at Citigroup Inc. Nissan Motor Co. (7201), Japan’s second-largest carmaker by revenue, rose 1.8 percent as the yen slid to the lowest level since April 2011 against the dollar. Tokyo Electric Power Co. (9501) surged 33 percent on speculation Japan’s new government will allow the restart of nuclear reactors.

The MSCI Asia Pacific Index slipped 0.1 percent to 127.33 as of 7:48 p.m. in Tokyo after rising as much as 0.3 percent. The measure capped a 12-day rally on Dec. 14, the longest winning streak since January 2004. The MSCI Asia Pacific Excluding Japan Index fell 0.5 percent to 462.74.

“The upward momentum of Apple shares peaked out as investors priced in all the good news,” said Mitsushige Akino, Tokyo-based chief fund officer at Ichiyoshi Asset Management Co., which oversees about $356 million. “That’s affecting the Apple suppliers that were trading at a premium. Investors are concerned whether Apple can come up with something that can surpass iPhones. It needs something beyond people’s imagination, and that’s a hard hurdle to clear.”

Overbought Signals

The 14-day relative strength index of the MSCI Asia Pacific Index climbed to 77 on Dec. 14, rising above the 70 threshold that some traders say signals equities are overheating.

Asia’s benchmark equities index rose 12 percent this year as central banks from the U.S., Europe, Japan and China took action to spur economic growth. The gauge traded at 14.4 times average estimated earnings as of Dec. 14, compared with 13.6 for the Standard & Poor’s 500 Index and 12.7 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Apple suppliers dropped after Citigroup cut its rating on the world’s most valuable company to neutral from buy, citing a cut in iPhone orders.

Hon Hai Precision, which assembles the smartphone, lost 4.7 percent to NT$87.20. Foxconn Technology Co., which makes iPhone casings, dropped 4.7 percent to NT$89.70. Largan Precision Co., which makes lenses for Apple, sank 5.5 percent to NT$741 in Taipei. Taiwan’s Taiex Index (TWSE) dropped 0.9 percent.

Japan’s Nikkei 225 Stock Average rose 0.9 percent to close at the highest level since April 3. Australia’s S&P/ASX 200 slid 0.2 percent and New Zealand’s NZX 50 Index fell 0.3 percent. South Korea’s Kospi Index dropped 0.6 percent.

Hong Kong’s Hang Seng Index fell 0.4 percent, while China’s Shanghai Composite Index rose 0.5 percent. Singapore’s Straits Times Index slid 0.3 percent.

Japan’s Election

Japanese shares advanced after the Liberal Democratic Party reclaimed power in a landslide victory yesterday. The yen dropped against all of its 16 major counterparts on expectations the new government will expand monetary and fiscal stimulus to reverse deflation. The Bank of Japan is scheduled to conclude a policy meeting on Dec. 20.

“This is going to have a tremendous impact on the fortunes of Japanese exporters and the economy,” Ed Rogers, chief executive officer at Tokyo-based Rogers Investment Advisors, told Bloomberg Television today. “The moves in the dollar-yen indicate that the world at large believes that we’re starting on the path to reflation.”

Nissan, which gets about 79 percent of its revenue outside Japan, added 1.8 percent to 799 yen. Sumitomo Realty & Development Co. gained 3.4 percent to 2,437 yen. Fast Retailing Co. (9983), Asia’s biggest apparel chain, rose 2.9 percent to 20,500 yen.

Korean Carmakers

Hyundai Motor Co. led South Korean auto stocks lower in Seoul trading after the yen weakened, boosting prospects for Japanese carmakers’ exports. Hyundai declined 2 percent to 225,000 won. Kia Motors Corp., a unit of Hyundai, slumped 3.6 percent to 59,200 won.

Tokyo Electric, known as Tepco, surged 33 percent to 202 yen on speculation the LDP’s victory will pave the way for the utility to restart reactors at its Kashiwazaki Kariwa nuclear plant, the world’s biggest. Shikoku Electric Power Co. jumped 15 percent to 1,308 yen, while Kansai Electric Power Co. soared 18 percent to 920 yen.

Futures on the S&P 500 index added 0.3 percent today. The gauge dropped 0.4 percent on Dec. 14 as a lack of progress in U.S. budget talks outweighed a rise in industrial production and data showing China’s manufacturing may expand at a faster pace.

President Barack Obama and Republican House Speaker John Boehner remained deadlocked at their third White House meeting on next year’s budget. More than $600 billion in tax increases and spending cuts, the so-called fiscal cliff, are scheduled to take effect in January unless Congress acts to avert them.

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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