Bloomberg News

Asian Stocks Headed for Biggest Monthly Loss in a Year on China

June 24, 2013

Asian stocks declined, with the benchmark regional index heading toward the worst monthly loss in a year, as Chinese stocks entered a bear market amid a cash crunch at banks in the world’s second-largest economy.

Industrial & Commercial Bank of China Ltd., the world’s largest lender, lost 3 percent in Hong Kong, having risen just one day in June. BHP Billiton Ltd., the No. 1 mining company, declined 3.4 percent, as Goldman Sachs Group Inc. cut its growth forecast for China. AMP Ltd. tumbled 13 percent, its biggest slide in 10 years, after Australia’s largest life insurer said it expects profit to fall as much as 16 percent.

The MSCI Asia Pacific Index slid 1.8 percent to 125.43 as of 8 p.m. in Hong Kong, bringing this month’s decline to 7 percent. More than three shares fell for every one that advanced. The gauge declined 2.3 percent last week amid concern that Federal Reserve stimulus measures for the U.S. economy are nearing an end and that interbank lending in China is worsening.

“Volatility is going to be the order of the week for the markets,” Vasu Menon, head of content and research at OCBC Bank Ltd. in Singapore, told Bloomberg TV. “China has had a credit binge for way too long. The government is trying to rebalance the economy, trying to downsize the shadow banking system. All that means credit is going to remain fairly tight.”

Volatility indexes for Japan’s Nikkei 225 Stock Average and Hong Kong’s Hang Seng Index both advanced. The Nikkei Stock Average Volatility Index gained 3.5 percent and the HSI Volatility Index soared 18 percent.

Regional Gauges

Japan’s Topix index slid 0.9 percent. The Bank of Japan probably promised too much when it set a goal of lifting the inflation rate to 2 percent within two years, according to Takahiro Mitani, president of the country’s public pension fund, the world’s biggest.

Australia’s S&P/ASX 200 Index declined 1.5 percent and South Korea’s Kospi index slid 1.3 percent. New Zealand’s NZX 50 Index was little changed.

Hong Kong’s Hang Seng Index fell 2.2 percent and the Shanghai Composite Index dropped 5.3 percent, the most since August 2009. The Hang Seng China Enterprises Index (HSCEI) of mainland shares listed in Hong Kong retreated 3.2 percent, the lowest since October 2011.

China’s CSI 300 Index, representing the 300 biggest companies in the Shanghai and Shenzhen stock exchange, lost 6.3 percent, falling 22 percent from this year’s high and entering a bear market.

China Growth

Goldman Sachs lowered its estimate for 2013 Chinese gross domestic product growth to 7.4 percent from 7.8 percent, citing weaker economic indicators and tightening of financial conditions, according to a report today from economist Li Cui. China International Capital Corp. also cut its GDP growth forecast, to 7.4 percent from 7.7 percent, according to an e-mail from its public relations department.

The Hang Seng Finance Index, a gauge of Chinese banks listed in the Hong Kong, a fifth day of losses, retreating 2.3 percent. ICBC sank 3 percent to HK$4.48. Bank of China Ltd. fell 2.6 percent to HK$2.99 and China Construction Bank Corp. dropped 2.1 percent to HK$5.08.

China’s central bank said it may adjust monetary policy as needed, suggesting officials are more open to loosening policies as a cash squeeze risks exacerbating an economic slowdown. The People’s Bank of China said the nation should “appropriately fine-tune” its policies, according to a statement yesterday that summarized the monetary policy committee’s second-quarter meeting in Beijing.

Global Slump

The MSCI All-Country World Index, a gauge of developed and emerging market shares, sank the most in a year last week as almost $2 trillion was erased from the value of global equities after the Fed indicated it could start paring asset purchases this year should the U.S. economy continue to improve.

The MSCI Asia Pacific Index, the benchmark regional equities gauge, retreated 12 percent through last week from the closing level on May 20, which was the highest since June 2008. That left the measure trading at 12.4 times average estimated earnings, compared with multiples of 14.4 for the Standard & Poor’s 500 Index and 12.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China’s Shanghai Composite Index will jump about 12 percent in coming months as its June slump exhausts sellers, Tom DeMark, the creator of indicators to show turning points in securities, wrote in an e-mail from Scottsdale, Arizona, on June 21.

The benchmark index for Chinese equities will climb to 2,323 after producing a buy signal June 21 on the Combo chart, designed to identify market tops and bottoms, said DeMark, who has spent more than 40 years developing market-timing indicators. The Shanghai index fell 9.9 percent this month through June 21, poised for the worst month since August 2009, while the Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. lost 6.5 percent.

Futures Drop

Futures on the Standard & Poor’s 500 Index slid 0.9 percent today. U.S. stocks fell last week, sending benchmark indexes to their worst retreat since April, after Fed Chairman Ben S. Bernanke said he may phase out monetary stimulus.

Raw-materials producers declined as copper futures retreated. BHP Billiton lost 3.4 percent to A$31.35 and Rio Tinto Group, the world’s second-largest mining company, declined 2.1 percent to A$51.54 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, slipped 4.9 percent to HK$13.64 in Hong Kong.

AMP tumbled 13 percent to A$4.34, its largest slide since May 2003, after saying it expects first-half underlying profit will fall as much as 16 percent. Credit Suisse Group AG said it will reduce its earnings estimates for AMP by A$67 million following the announcement.

In Japan, Acom Co. jumped 3.2 percent to 3,035 yen after the consumer lender announced a stock split. SoftBank Corp. gained 0.7 percent to 5,600 yen after rival bidder Dish Network Corp. abandoned its effort to acquire Sprint Nextel Corp.

To contact the reporter on this story: 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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