Bloomberg News

Asian Stocks Poised for Three-Week Low on Ukraine Tension

August 07, 2014

Asian stocks fell, with the regional benchmark index heading for a three-week low, as tensions mounted over Ukraine and casino shares slumped.

DeNA Co., a mobile game and social-media service, plunged 7.1 percent in Tokyo after predicting a decline in first-half profit. Galaxy Entertainment Group Ltd. dropped 6.4 percent, pacing losses among Macau casino operators, after the world’s largest gambling hub posted the weakest monthly growth in mass market revenues since at least 2010. Mitsui Fudosan Co., Japan’s largest real-estate company, fell 1.3 percent after reporting lower quarterly net income.

The MSCI Asia Pacific Index (MXAP) dropped 0.2 percent to 145.98 as of 4:19 p.m. in Hong Kong, set for the lowest close since July 11 and extending its three-day loss to 1.3 percent. The U.S. has joined NATO and Poland in warning there’s a risk Russia could send troops into Ukraine.

“This is an undefinable event with an undefinable outcome for markets,” Evan Lucas, Melbourne-based market strategist at IG Ltd., wrote in a note. “Ukraine will remain a focal point for the remaining months of 2014.”

Russia will ban billions of dollars of food imports from the U.S. and other nations in retaliation for sanctions imposed over the turmoil in Ukraine. Russian President Vladimir Putin yesterday ordered restrictions on imports for one year from countries that have imposed or supported sanctions against Russia, according to the Kremlin website.

Regional Gauges

Hong Kong’s Hang Seng Index sank 0.8 percent and the Hang Seng China Enterprises Index of mainland shares traded in the city declined 0.9 percent. China’s Shanghai Composite Index retreated 1.3 percent. South Korea’s Kospi index slid 0.3 percent. Singapore’s Straits Times Index both fell 0.4 percent. India’s BSE S&P Sensex index and Taiwan’s Taiex index both lost 0.1 percent.

Australia’s S&P/ASX 200 Index dropped 0.1 percent. The nation’s jobless rate rose to 6.4 percent in July, a 12-year high, the statistics bureau said in Sydney today. That compares with the median 6 percent estimate in a Bloomberg News survey of 24 economists. New Zealand’s NZX 50 Index added 0.1 percent.

Japan’s Topix index climbed 0.6 percent. The gauge reversed a loss as much as 0.7 percent after Reuters reported the nation’s biggest pension fund plans to boost its domestic stock holdings by more than analysts had expected.

GPIF Investments

The 126.6 trillion yen ($1.2 trillion) Government Pension Investment Fund plans to increase its target for Japanese equities to more than 20 percent from the current 12 percent, Reuters reported, citing unidentified government and ruling-party officials. Analysts and investors had expected an increase to 20 percent, according to a Bloomberg News survey in May.

“I’m not sure how much beyond 20 percent they may go for stocks, but it’s positive news and came when the market was looking for a catalyst,” said Takuya Takahashi, a senior strategist at Daiwa Securities Group Inc. “The market is reacting strongly because it’s fallen a lot. Everyone was ready to jump on good news because the fundamentals aren’t bad.”

Futures on the Standard & Poor’s 500 Index added 0.2 percent today. The measure closed flat yesterday as declines in Sprint Corp. and Time Warner Inc. on merger news offset gains in consumer shares.

China releases July trade data tomorrow, with export growth forecast to have decelerated to 7 percent as imports expanded 2.6 percent, down from 5.5 percent in June, according to a Bloomberg survey of economists.

Prada, Tencent

Prada SpA fell 1.3 percent to HK$53.65 in Hong Kong. The Milan-based luxury handbag maker posted the slowest half-yearly sales growth in three years as demand weakens in some Asian countries and in Europe amid economic and political uncertainties. Prada’s revenue climbed 1 percent to 1.75 billion euros ($2.34 billion) in the six months through July, the company said in a statement to Hong Kong’s stock exchange yesterday.

Tencent Holdings Ltd., Asia’s largest Internet company, slumped 3.5 percent to HK$128.30, the biggest decline since May 7, after saying its instant messaging application will crack down on rumors and fraud.

DeNA tumbled 7.1 percent to 1,211 yen, its lowest close since November 2009, after saying first-half profit will fall 64 percent to 6.6 billion yen ($65 million).

Mitsui Fudosan slid 1.3 percent to 3,268.5 yen after reporting first-quarter net income declined 6.2 percent from a year earlier to 15.7 billion yen.

Shares of Macau casino operators slumped in Hong Kong amid slowing mass-market growth. Macau’s July monthly casino revenue breakdown, released late yesterday, showed the mass market growing 17 percent from a year ago, “the lowest result since we started tracking the data in 2010,” Cameron McKnight, a U.S.- based analyst at Wells Fargo & Co., wrote in a note.

Casinos Slump

Galaxy Entertainment, founded by billionaire Lui Che Woo, dropped 6.4 percent to HK$59.40. Sands China Ltd. fell 5.8 percent to HK$52.35. Wynn Macau Ltd. sank 7.6 percent to HK$29.35. MGM China Holdings Ltd. slipped 6.3 percent to HK$25.85.

Among shares that advanced, Meiji Holdings Co. (2269) jumped 12 percent to 8,340 yen in Tokyo, closing at a record. The maker of dairy products reported net income rose 13 percent to 7.4 billion yen.

Of the companies on the Asian stock gauge that released quarterly results from the beginning of July through yesterday and for which Bloomberg had estimates, 59 percent beat earnings expectations.

The Asia-Pacific gauge traded at 13.5 times estimated earnings as of yesterday compared with 16.1 for the S&P 500 and 14.9 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

(An earlier version of this story was corrected to remove reference to DeNA cutting forecast.)

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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


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