Bloomberg News

Asian Stocks Decline on U.S. Budget as Yen Surges

December 20, 2012

Most Asian stocks fell, with the regional benchmark index trading near a 16-month high, amid concern U.S. budget negotiations are faltering and as a surging yen weighed on Japanese stocks even after the Bank of Japan (8301) boosted its asset purchases for the third time in four months.

Samsung Electronics Co. (005930), which gets a fifth of its revenue in America, dropped 0.8 percent in Seoul. Canon Inc. (7751), a camera maker that gets 80 percent of its sales outside Japan, dropped 2.9 percent. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, advanced 1.2 percent. Nissan Motor Co. slumped 7.4 percent after Nomura Holdings Inc. cut its rating on the stock.

About 10 shares fell for every nine that gained on the MSCI Asia Pacific Index, which was little changed at 129.44 as of 5:14 p.m. in Tokyo. The gauge closed yesterday at the highest level since August 2011.

“U.S. budget talks could be a reason for a short-term correction quite soon,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “People are still taking profits towards the year-end and also ahead of the U.S. budget talk solution. The pattern of the correction probably would be steep and fast but probably won’t last too long. The overall trend is up.”

Asia’s benchmark equities index has risen about 14 percent this year as central banks around the world took action to spur growth and on signs of recovery in the U.S. and China. The gauge traded at 14.7 times average estimated earnings compared with 13.8 for the Standard & Poor’s 500 Index and 12.8 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Nikkei, Topix

Japan’s Nikkei 225 Stock Average (NKY) declined 1.2 percent, with the yen rising against all of its 16 major counterparts. The broader Topix Index fell 0.1 percent.

South Korea’s Kospi Index rose 0.3 percent after Park Geun Hye was elected president of South Korea, the first woman to lead the nation. Australia’s S&P/ASX 200 gained 0.4 percent, with trading volume 52 percent above the 30-day average as December futures contracts on the index expired.

New Zealand’s NZX 50 Index advanced 1.3 percent, led by Fletcher Building Ltd. as AMP Capital increased its stake in the nation’s biggest construction company to above 5 percent. The benchmark closed at is highest level in five years.

Hong Kong’s Hang Seng Index (HSI) rose 0.2 percent, while China’s Shanghai Composite Index gained 0.3 percent. Taiwan’s Taiex Index lost 1.1 percent. Singapore’s Straits Times Index added 0.5 percent.

Budget Battle

Futures on the S&P 500 index fell 0.1 percent today. The gauge dropped 0.8 percent yesterday, when White House Communications Director Dan Pfeiffer said President Barack Obama would veto a tax and spending proposal presented by House Speaker John Boehner because it would put “too big a burden on the middle class.” A failure to reach a compromise before year- end will result in $600 billion in automatic tax increases and spending cuts, the so-called fiscal cliff.

Companies that do business in the U.S. fell, with Samsung dropping 0.8 percent to 1.503 million won. Techtronic Industries Co. (669), a maker of power tools that counts North America as its biggest market, retreated 3 percent to HK$14.92.

Canon declined 2.9 percent to 3,355 yen as the yen advanced. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, fell 1.6 percent to 921 yen.

Japan’s Topix index has surged 16 percent since Nov. 14, when the previous government said it would call elections. There are expectations the Liberal Democratic Party, which swept to victory over the weekend, will call for more stimulus and a doubling of the nation’s inflation goal. The BOJ today expanded its asset-purchase fund to 76 trillion yen ($905 billion) from 66 trillion yen, according to a statement released in Tokyo today.

BOJ Shuffle Coming

Incoming Prime Minister Shinzo Abe will have a chance to reshape the BOJ early next year when the terms of Governor Masaaki Shirakawa and two deputies expire.

“Today is just a beginning for what will happen down the road,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about 15 trillion yen ($179 billion). “The BOJ wouldn’t have moved if there was no political pressure. People will be raising bets that next year the LDP-led government and the BOJ will join forces and do more to combat deflation.”

Mitsubishi UFJ advanced 1.2 percent to 440 yen. Sumitomo Mitsui Financial Group Inc. (8316), the country’s second-biggest lender by market value, rose 0.8 percent to 3,035 yen.

Nissan slumped 7.4 percent to 782 yen after Nomura cut its rating on the carmaker, citing concern the company may miss its profit target on higher costs and slower sales.

Mitsubishi Motors Corp. (7211) fell 5.5 percent to 86 yen after receiving a government warning saying it was “passive” in its handling of engine oil leaks as the carmaker ordered a fourth round of recalls.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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


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