Through the Wire

Asian Stocks Slide as Greece Concerns Temper China Speculation

November 2, 2011
| Economics
| Europe

Nov. 2 (Bloomberg) -- Asian stocks fell for a third day as Greece’s plan for a referendum on Europe’s bailout stoked concern the sovereign-debt crisis won’t be contained. Hong Kong stocks rallied on speculation that China may act to stimulate its economy.

Macquarie Group Ltd., the Australian bank that gets 16 percent of revenue from Europe, dropped 2.8 percent on speculation a default by Greece will threaten bank earnings. Sony Corp., Japan’s biggest exporter of consumer electronics, slid 3.6 percent after a report showed U.S. manufacturing slowed. Industrial & Commercial Bank of China Ltd. led a rally among mainland banks as money-market rates fell on speculation the central bank will add funds to ease a cash shortage.

The MSCI Asia Pacific Index slipped 0.5 percent to 118.43 as of 6:45 p.m. in Tokyo, with three stocks falling for every two that rose. The measure pared losses as Chinese banks, developer and infrastructure companies rallied on speculation the government may introduce measures to stimulate the economy.

“A loosening of monetary policy in China could support the stock market,” said Hong Kong-based Michiya Tomita, who helps oversee about $65 billion for Mitsubishi UFJ Asset Management Co. “Any gains may not be sustainable as uncertainties in Europe persist. Investors are taking a wait-and-see attitude.”

Japan’s Nikkei 225 Stock Average decreased 2.2 percent. South Korea’s Kospi Index lost 0.6 percent. Australia’s S&P/ASX 200 slipped 1.1 percent.

Hong Kong’s Hang Seng Index gained 1.9 percent, erasing losses of as much as 1.8 percent. China’s Shanghai Composite Index advanced 1.4 percent, reversing a decline of as much as 1.5 percent.

Emergency Talks

Futures on the Standard & Poor’s 500 Index advanced 0.7 percent today, after earlier dropping as much as 0.6 percent. The index fell 2.8 percent yesterday in New York after Greek Prime Minister George Papandreou said voters should decide if they’ll accept the terms of Europe’s bailout and whether the country should remain in the European Union and the euro area.

This week’s slide in Asian stocks has almost erased gains that came last week as Europe appeared to have struck a deal to contain the debt crisis. Papandreou, whose hold on power is weakening, will fly to Cannes, France, today on the eve of a Group of 20 summit that starts tomorrow.

French President Nicolas Sarkozy and German Chancellor Angela Merkel held emergency talks on Greece yesterday and in a joint statement called on Europe to implement the package of measures. Sarkozy told reporters the plan is the “only way” to fix Greece.

Macquarie sank 2.8 percent to A$23.62. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, decreased 2.3 percent to 334 yen. Rival Sumitomo Mitsui Financial Group Inc. fell 2.2 percent to 2,144 yen.

‘Naturally Skeptical’

“People were naturally skeptical that the resolution agreed last week in Europe was going to bring an end to the volatility in markets, and that’s clearly the case with what we’ve seen,” Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The deteriorating global economic growth indicators is an increasingly uncertain backdrop.”

Stocks also fell amid signs U.S. manufacturing is slowing. The U.S. Institute for Supply Management’s factory index dropped to 50.8 last month from 51.6 in September, a report showed yesterday. The number was below the median economist prediction of 52. Fifty is the dividing line between growth and contraction.

James Hardie Industries SE, a supplier of building materials that counts the U.S. as its biggest market, sank 3.7 percent to A$5.81 in Sydney. Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, slipped 1.9 percent to 971,000 won in Seoul. Sony slid 3.6 percent to 1,520 yen in Tokyo.

Toyota Motor Corp. and Honda Motor Co. declined after a report showed U.S. sales for Japan’s top two carmakers declined last month. Toyota fell 3.5 percent to 2,505 yen. Honda dropped 4.2 percent to 2,304 yen.

The MSCI Asia Pacific Index declined 14 percent this year through yesterday, compared with a 3.1 percent drop by the S&P 500 and a 15 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.4 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10.1 times for the Stoxx 600.

Negative Surprises

Of the 393 companies on the Asian gauge that have reported quarterly results since Oct. 11, 189 missed analysts’ estimates, while 138 exceeded expectations, according to data compiled by Bloomberg.

Nomura Holdings Inc. fell 4.1 percent to 282 yen after the brokerage posted a second-quarter loss of 46.1 billion yen ($590 million) that’s wider than analysts’ estimated. The company said will consider eliminating jobs at home to cut costs

Samsung Heavy Industries Co., South Korea’s second-biggest shipbuilder by market value, dropped 3.4 percent to 32,600 won in Seoul after reporting a 53 percent slump in profit.

OneSteel Ltd., Australia’s second-largest producer of the metal, tumbled 18 percent to 98.5 Australian cents in Sydney, the most on record and the biggest decline on the MSCI Asia Pacific Index. The company cut its first-half profit forecast because of lower iron ore prices and gains in the local currency.

Among stocks that advanced, Chinese lenders and developers advanced on speculation the nation’s slowing inflation would convince authorities to ease monetary policy. China’s inflation may ease to 5.3 percent or 5.4 percent in October, said Zhu Jianfang, a Beijing-based economist at Citic Securities Co. The figure is due next week. Consumer prices rose 6.1 percent in September.

Banks, Developers

ICBC, as the world’s biggest lender by market value is known, jumped 4 percent to HK$4.94 in Hong Kong. China Construction Bank Corp., the nation’s No. 2 lender by market value, increased 3 percent to HK$5.83. China Overseas Land & Investment Ltd., the largest mainland developer listed in Hong Kong, surged 6.1 percent to HK$14.52. China Resources Land Ltd., a state-owned developer, climbed 3.9 percent to HK$11.64.

Builders of China’s rail infrastructure rallied after a report by Xinhua News Agency, which cited unnamed people from the railway ministry, said the government will get more than 200 billion yuan ($31.5 billion) as financial support to ensure payments for projects.

China Railway Group Ltd., China’s biggest builder of railway infrastructure, jumped 9 percent to HK$2.92 in Hong Kong. China Railway Construction Corp. surged 11 percent to HK$5.36.

--With assistance from Yoshiaki Nohara in Tokyo. Editors: John McCluskey, Nick Gentle


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