Bloomberg News

Asia Stocks Drop Most in Eight Months on Cyprus Bank Levy

March 18, 2013

Asian stocks fell, with the regional benchmark index heading for the biggest drop in eight months, amid concern an unprecedented levy on bank deposits in Cyprus will plunge Europe back into crisis and that China will add property curbs.

Every benchmark gauge in the Asia-Pacific dropped, with the regional measure shedding about $190 billion in market value, equivalent to almost eight times Cyprus’ annual gross domestic product. Toyota Motor Corp. (7203), the world’s biggest automaker, slid 3.4 percent as the yen gained against all its major peers. Esprit Holdings Ltd., a Hong Kong-based clothier that counts Europe as its No. 1 market, dropped 2.2 percent in Hong Kong. BHP Billiton Ltd. (BHP) fell 2.4 percent in Sydney, leading mining companies lower.

The MSCI Asia Pacific Index (MXAP) sank 1.89 percent to 134.08 as of 7:49 p.m. in Tokyo, headed for its biggest decline since July, with five shares falling for each that gained. The measure rose 5.6 percent this year through last week as improving economic data from the U.S. and speculation that Japan will unleash more stimulus countered China’s efforts to rein in property prices.

“The market is probably overreacting to the Cyprus bailout,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management Asia Ltd., whose Japan-based parent oversees about $165 billion. “The investment environment is still pretty conducive. Once the knee-jerk reaction to Cyprus is over, then you’re back to a set of solid fundamentals that has been behind this recovery. Valuations aren’t expensive.”

Relative Value

The MSCI Asia Pacific Index has rallied the past four months as central banks maintained loose monetary policies to spur growth. Shares on the gauge traded at 14.7 times estimated earnings last week compared with 14 times for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

“The safest place to be if you think the market’s going to go down is cash,” Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which manages about $1 billion, told Bloomberg Television. “We’ve been finding valuations problematic for about six weeks and as a result we’ve built up cash in our portfolio. There are no sectors that are particularly cheap right now. We’re only looking for a 10 percent correction at the most.”

Nikkei 225

Japan’s Nikkei 225 Stock Average (NKY) retreated 2.7 percent, its biggest decline in 10 months. Australia’s S&P/ASX 200 Index dropped 2.1 percent. South Korea’s Kospi Index lost 0.9 percent, while Taiwan’s Taiex fell 1.5 percent.

Hong Kong’s Hang Seng Index tumbled 2 percent, the most since Feb. 5, with volume 27 percent above its 30-day average for the time of day. China’s Shanghai Composite Index fell 1.7 percent.

China on March 1 imposed its toughest real estate curbs in a year, ordering the central bank to raise down-payment requirements and interest rates for some second mortgages, as well as enforcing a property sales tax.

Home prices in China climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said today. Cities will be forced to introduce new price-control measures as upward pressure on prices will definitely increase in short term, Credit Suisse Group AG analyst Jinsong Du said in an e-mail.

Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) to help fund a bailout by taking a piece of every bank account in Cyprus. The president delayed a vote on the measure in parliament until today, a day later than planned, as he seeks more time to persuade lawmakers to back him.

‘Sell Euro’

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said on Twitter that the concern in Cyprus “moves risk-on trade to back seat.” He added: “Sell euro as well.”

The euro dropped to its lowest this year against the dollar and the yen strengthened against all major currencies. Exporters fell, with Toyota Motor losing 3.4 percent to 4,850 yen and Nissan Motor Co. declining 3.5 percent to 951 yen. Esprit retreated 2.2 percent to HK$9.10.

The HSI Volatility Index (VHSI), a gauge of Hong Kong-listed options prices, surged 18 percent, the most since July, to 18.01, heading for the biggest advance since July and indicating traders expect a swing of about 5.2 percent during the next 30 days. Measures of options prices in Japan and Australia also jumped more than 15 percent.

Resource Stocks

Commodities fell as Cyprus stoked concern that Europe’s debt crisis will deepen. Copper dropped by the most in five months, pacing declines in industrial metals and oil.

BHP Billiton, the world’s largest mining company, fell 2.4 percent to A$34.69 in Sydney. Rio Tinto Group, the second- biggest, slid 2.9 percent to A$59.55. Jiangxi Copper Co., China’s No.1 producer of the metal, fell 2.3 percent to HK$17.02.

China’s property developers extended losses. Shimao Property Holdings Ltd., controlled by billionaire Hui Wing Mao, sank 1.4 percent to HK$12.96. Guangzhou R&F Properties Co. lost 2.4 percent to HK$11.32. Agile Property Holdings Ltd. dropped 1.6 percent to HK$8.88.

Futures on the Standard & Poor’s 500 Index dropped 0.9 percent today. The U.S. equity gauge climbed on March 14 to within two points of its record closing level of 1,565.15 set in October 2007.

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

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


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