Bloomberg News

Asian Stocks Fall, Pare Monthly Gain, as Tech Shares Drop

July 31, 2014

Asian stocks dropped, with the regional benchmark index paring its third straight monthly gain, as technology shares from Samsung Electronics Co. to Nintendo Co. declined.

Samsung sank 3.7 percent in Seoul as the world’s biggest maker of smartphones posted net income that missed estimates amid competition from Apple Inc. and Chinese producers. Nintendo slumped 6.5 percent in Tokyo after the maker of Wii gaming consoles reported its third loss in the past four quarters. Singapore Airlines Ltd. slid 2.6 percent after Asia’s second-largest carrier by market value posted weaker earnings.

The MSCI Asia Pacific Index (MXAP) lost 0.4 percent to 148.81 as of 7:57 p.m. in Hong Kong, reversing an earlier gain of 0.2 percent. The measure climbed 2.1 percent this month and reached its highest level since June 2008 on July 29.

“The market is due for a slight pullback,” Desmond Chua, a strategist at CMC Markets in Singapore, said by phone. “There are concerns about geopolitical flare-ups and the timing of U.S. interest-rate hikes as the Fed nears the end of quantitative easing.”

Taiwan’s Taiex index declined 1.4 percent. The nation’s economy expanded 3.8 percent in the second quarter from a year earlier, preliminary figures from the statistics bureau released today showed. That compared with the 3.2 percent median estimate of 26 economists in a Bloomberg survey.

Regional Gauges

South Korea’s Kospi index fell 0.3 percent after closing at the highest since August 2011 yesterday. Japan’s Topix index lost 0.2 percent, erasing gains of as much as 0.6 percent. The FTSE Bursa Malaysia KLCI Index fell 0.4 percent, while Thailand’s SET Index slid 1.1 percent. India’s S&P BSE Sensex declined 0.7 percent.

Hong Kong’s Hang Seng Index (HSI) added 0.1 percent, reversing an earlier decline of 0.3 percent and extending a more than three-year high. China’s Shanghai Composite Index advanced 0.9 percent. Singapore’s Straits Times Index rose 0.6 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index both rose 0.2 percent.

The MSCI Asia Pacific Index traded at 13.7 times estimated earnings yesterday compared with 16.5 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

Of the companies on the Asia-Pacific benchmark gauge that have posted results since the beginning of July and for which Bloomberg has estimates, 60 percent beat earnings expectations.

Asian Earnings

Samsung dropped 3.7 percent to 1.343 million won in Seoul. Net income, excluding minority interests, fell 18 percent to 6.18 trillion won ($6 billion) in the three months ended June, the company said in a filing today. That compares with the 6.83 trillion-won average of 17 analyst estimates compiled by Bloomberg.

Nintendo tumbled 6.5 percent to 11,525 yen in Tokyo. The company posted a net loss of 9.9 billion yen ($96 million) in the three months ended June 30 after demand for the Wii console dropped as gamers continue their exodus to smartphones and rival players from Sony Corp. and Microsoft Corp.

Singapore Air fell 2.6 percent to S$10.33. Net income in the three months ended June declined to S$34.8 million ($28 million) from S$121.8 million a year earlier amid increased competition from budget airlines and Middle East carriers such as Emirates Airlines that are expanding into Asia.

Futures on the S&P 500 fell 0.5 percent today. The U.S. benchmark index closed little changed yesterday as data showing better-than-forecast economic growth was offset by weaker earnings and the Fed’s decision to keep trimming asset purchases.

U.S. Growth

Exporters advanced after a Commerce Department report showed gross domestic product expanded at a 4 percent annualized pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. The median forecast of 80 economists surveyed by Bloomberg called for a 3 percent expansion.

James Hardie Industries SE (JHX), a building materials supplier that gets about 73 percent of sales from the U.S., climbed 1.5 percent to A$13.68 in Sydney. LG Display Co., a supplier of liquid-crystal display screens used in Apple devices, jumped 4.6 percent to 34,050 won in Seoul.

Mitsubishi Motors Corp. rose 2.6 percent to 1,185 yen in Tokyo after the carmaker reported first-quarter net profit increased 71 percent from a year earlier to 28.2 billion yen, beating analyst estimates.

Stimulus Tapering

U.S. policy makers tapered monthly bond buying to $25 billion in their sixth consecutive $10 billion cut, staying on pace to end the purchase program in October. Fed officials led by Chair Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up toward their 2 percent goal.

The Fed said the labor market still has plenty of room for improvement, even after a surprising drop in unemployment.

“The U.S. economy is recovering and the Fed is still concerned about unemployment,” Kirk Hartman, Los Angeles-based chief investment officer at Wells Capital Management, where he helps oversee about $331 billion, told Bloomberg TV. “I don’t see inflation on the horizon, so there’s no real impetus for rates to increase any time soon.”

Standard & Poor’s declared Argentina in default on its foreign-currency obligations after the government missed a deadline for paying interest on $13 billion of restructured bonds. The South American country failed to get the $539 million payment to bondholders after a U.S. judge ruled that the money couldn’t be distributed unless a group of hedge funds holding defaulted debt also got paid.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net John McCluskey


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