Asian Stocks Fall on Europe Debt Concern; Canon, Banks Slump
By Kana Nishizawa and Norie Kuboyama
May 6 (Bloomberg) -- Asian stocks slumped, dragging the MSCI Asia Pacific Index down by the most in three months and erasing its 2010 gain on concern the Greek deficit crisis will spread through Europe and hurt the global economic recovery.
Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 3.1 percent in Tokyo. Korea Zinc Co., the world’s second-biggest zinc refiner, sank 6.3 percent in Seoul as commodity prices declined yesterday. BHP Billiton Ltd., the world’s largest mining company, lost 2.4 percent in Sydney. Westpac Banking Corp. sank 4.6 percent on brokerage downgrades.
The MSCI Asia Pacific Index dropped 2.2 percent to 119.95 as of 1:27 p.m. in Tokyo, the most since Feb. 5. The gauge has risen 5 percent from its low this year on Feb. 8 as better-than- estimated economic data and company earnings around the world offset European debt concerns. Moody’s Investors Service yesterday placed its Portugal rating on review for a possible downgrade.
“The Greece issues are raising concerns about the health of the financial system globally and slowing down the flow of money in markets,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages $300 billion.
Japan’s Nikkei 225 Stock Average slumped 3.1 percent after a three-day holiday in which mounting debt concerns in Europe and China’s actions to slow growth erased about $1.5 trillion from world equity markets.
China’s Shanghai Composite Index dropped 1.7 percent on concern the government will take more steps to curb property prices. Australia’s S&P/ASX 200 Index declined 2 percent. Hong Kong’s Hang Seng Index lost 1.1 percent, while South Korea’s Kospi Index slumped 2.2 percent.
‘Contagion Effects’
Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The gauge declined 0.7 percent yesterday and the MSCI World Index erased its 2010 gain as European Central Bank council member Axel Weber warned that Greece’s fiscal crisis may have “grave contagion effects” in the euro area.
All of the MSCI Asia Pacific Index’s 10 industry groups fell today. The declines left the gauge down 0.4 percent for the year. Companies in the measure trade at an average of 1.56 times book value, compared with about 1.5 times at the index’s February low, Bloomberg data show.
Canon lost 3.1 percent to 4,220 yen in Tokyo. Toyota Motor Corp., the world’s biggest automaker, fell 3 percent to 3,555 yen, the No. 2 drag on the MSCI Asia Pacific Index. Fanuc Ltd., a maker of industrial robots that earns about 15 percent of its revenue in Europe, sank 3.9 percent to 10,740 yen.
Euro, Yen
Japanese exporters also fell as a weaker euro threatened to reduce the value of European income when converted back into yen. The euro fell to as low as 119.96 yen earlier from 124.58 at the 3 p.m. close of Tokyo trading on April 30. Europe’s currency rose 0.3 percent versus the yen today.
The euro slumped yesterday as the ECB’s Weber said the threat of contagion justifies Germany’s contribution to a 110 billion-euro ($142 billion) aid package for Greece.
MSCI’s gauge for the Asia-Pacific region excluding Japan tumbled 4.1 percent in the last three days on concern countries in addition to Greece may need a bailout. Moody’s yesterday placed its Aa2 rating for Portugal on review as the country struggles to reduce its deficit and revive economic growth.
“At some point, investors may start to distinguish the European situation from the reality in Asia and even the U.S.,” said Angus Gluskie, who manages about $300 million at White Funds Management Pty in Sydney. “But at this stage, everything is moving in synch.”
Mining Shares Drop
In Seoul, Korea Zinc tumbled 6.3 percent to 180,000 won after commodity prices slumped. Crude oil fell as much as 4.3 percent in New York. Copper tumbled to the lowest in more than 11 weeks and nickel plunged as much as 16 percent.
In Sydney, BHP Billiton slumped 2.4 percent to A$37.82. Rio Tinto Group, the world’s third-biggest mining company, sank 2.9 percent to A$66.30. Rio Tinto put some Australian expansion projects on hold to study the effect of the government’s proposed 40 percent “super tax” on mining profits.
Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, retreated 1.1 percent to A$44.21.
Westpac Banking, which yesterday expressed caution on the outlook for profit growth, slumped 4.6 percent to A$24.98 Analysts at Goldman Sachs JBWere Pty, Royal Bank of Scotland Group Plc., Deutsche Bank AG and Credit Suisse Group AG downgraded Westpac.
National Australia Bank Ltd., the country’s biggest business lender, fell 2.4 percent to A$26.13 after saying fiscal first-half profit tumbled 21 percent. Finance companies accounted for 32 percent of the MSCI Asia Pacific Index’s decline today.
Property Curbs
Huaxia Bank Co. plunged 10 percent to 11.45 yuan in Shanghai after saying it plans to raise as much as 20.8 billion yuan ($3 billion) in a share sale to replenish capital.
China Vanke Co., the country’s biggest listed property developer, dropped 2 percent to 7.34 yuan in the southern city of Shenzhen. The city will limit home purchases by foreigners and citizens of Hong Kong, Macau and Taiwan to one residence until the end of the year, the China Securities Journal said.
Vanke shares fell even after the company reported higher property sales for April. Poly Real Estate Group Co. fell 3.6 percent to 11.02 yuan in Shanghai. Hang Lung Properties Ltd., a developer that generated 40 percent of its fiscal 2009 revenue in China, sank 3.4 percent to HK$26.70 in Hong Kong.
The government last month imposed a ban on loans for third- home purchases and raised mortgage rates and down-payment requirements for second-home purchases to curb housing prices, which rose at a record 11.7 percent in March.
Price Fixing
“Sentiment is very weak and worries among investors about slowing economic growth have been intensifying,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai. “Stocks still have further room for declines.”
AU Optronics Corp., Taiwan’s second-largest flat-panel maker, lost 2.7 percent to NT$34.05 in Taipei, while LG Display Co., the world’s second-largest liquid-crystal display maker, slumped 3.4 percent to 44,550 won in Seoul after a division of America Movil SAB sued the companies for price fixing.
Among stocks that advanced, Dena Co. surged 5.5 percent to 811,000 yen in Tokyo, the biggest gain on the MSCI Asia Pacific Index, after the operator of auction and shopping websites said its full-year net income rose on sales growth.
Genting Singapore Plc, the owner of one of two casino resorts in the city-state, gained 2.8 percent to 93.5 Singapore cents after UBS AG raised its rating to “neutral” from “sell.”
“Economic growth around the world is gaining positive momentum, and it’s not impossible that investors turn their minds again to improving growth outlook in other economies,” said White Funds’ Gluskie. “But at the moment, the Europe concern is the dominant risk. People are looking at thin facts and drawing some fast and possibly incorrect conclusions about how this might play out.”
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