Asian Stocks Drop as U.S. Services Report Dims Recovery Hopes
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By Shani Raja
Dec. 4 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index from a 15-month high, as an unexpected contraction in U.S. service industries sparked concern about the strength of the global economic recovery.
Rio Tinto Group, the world’s third-biggest mining company, dropped 2.3 percent in Sydney, as metal prices slid after a U.S. index of non-manufacturing businesses missed the median economist estimate. James Hardie Industries NV, the top seller of home siding in the U.S., slumped 3.8 percent. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., fell 3.8 percent in Hong Kong.
“Markets have had a great run in anticipation of a recovery,” said Matt Riordan, who helps manage about $5.1 billion at Paradice Investment Management in Sydney. “When you have data that’s not as supportive as you’d hoped, or which suggests the recovery might be taking longer than anticipated, it makes people a bit nervous.”
The MSCI Asia Pacific Index fell 0.3 percent to 121.28 as of 7:31 p.m. in Tokyo, after yesterday climbing to the highest level since Sept. 1, 2008. The gauge has advanced 6.5 percent this week, the steepest weekly gain since the period ended May 8. The index has rallied 72 percent from a five-year low on March 9 amid signs government stimulus measures are reviving global growth.
Japan’s Nikkei 225 Stock Average gained 0.5 percent as speculation mounted that Prime Minister Yukio Hatoyama will today unveil a stimulus package. The broader Topix index added 0.2 percent, completing its best week since August 1992.
Stimulus Package
Hong Kong’s Hang Seng Index dropped 0.3 percent. Anhui Tianda Oil Pipe Co. tumbled 6.8 percent after saying it plans to sell new shares. Zijin Mining Group Co., China’s biggest gold producer, sank 2.5 percent in Shanghai as gold prices declined. The Shanghai Composite Index rose 1.6 percent as bank capital- raising concerns eased.
Australia’s S&P/ASX 200 Index fell 1.5 percent, while New Zealand’s NZX 50 Index retreated 0.2 percent in Wellington. South Korea’s Kospi Index gained 0.6 percent.
Futures on the U.S. Standard & Poor’s 500 Index added 0.2 percent. The gauge fell for the first time in four days yesterday, losing 0.8 percent. The Institute for Supply Management’s index of businesses that make up almost 90 percent of the U.S. economy sank to 48.7 in November, compared with a median estimate of 51.5 by 71 economists. Fifty is the dividing line between expansion and contraction.
Economic Indicator
James Hardie, which gets more than three-quarters of its revenue from North America, sank 3.8 percent to A$8.18. Its shares rose 3.2 percent yesterday after the Federal Reserve said the U.S. economy had improved. Li & Fung fell 3.8 percent to HK$33.25 in Hong Kong.
“The weak economic indicator in the world’s biggest economy should spur a sell-off,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.
Rio dropped 2.3 percent to A$71.85. The London Metal Exchange Index, a measure of six metals including copper and zinc, dropped 1 percent yesterday, breaking a three-day winning streak. BHP Billiton Ltd., the world’s largest mining company, lost 2.5 percent to A$41.40. Korea Zinc Co. lost 1.8 percent to 215,500 won in Seoul.
Zijin Mining fell 2.5 percent to 10.74 yuan as gold for immediate delivery dropped for a second day. Bullion pared a weekly advance, on speculation that signs of a slowing recovery will boost the dollar and as record prices deter investors. In Sydney, Newcrest Mining Ltd., Australia’s largest gold producer slid 2.3 percent to A$38.30.
Slowing Recovery
The MSCI Asia Pacific Index’s rally from its March low has outpaced gains of 63 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 16 times for the Stoxx.
The Asian gauge’s gain this week has come as Chinese manufacturing grew at the fastest pace in five years and amid optimism the region’s companies will be sheltered from losses related to Dubai World, which last week sought to restructure its debt.
Dubai World only sought to delay payments on less than half its $59 billion of liabilities, easing the potential damage to banks recovering from $1.7 trillion of losses and writedowns from the global crisis. Hitachi Ltd., a maker of products ranging from washing machines to nuclear reactors, surged 4.2 percent 246 yen. Today is the last day before the company begins to set the price of new stock to be sold to pay debt and invest in facilities.
‘Positive Signs’
Sony Corp. rose 1.4 percent to 2,510 yen. The Japanese electronics maker saw “very positive signs” for sales of TVs, personal computers, PlayStation 3 game consoles and Blu-ray discs during the Thanksgiving week in the U.S., Chairman Howard Stringer told reporters yesterday.
Japan Airlines Corp. surged 8.7 percent to 100 yen after American Airlines proposed a $1.1 billion investment to keep it in the Oneworld alliance.
Japan’s Hatoyama, who took office in September, may propose spending as much as 4 trillion yen ($46 billion) in this year’s extra budget, Finance Ministry officials familiar with the matter said. The plan is likely to focus on helping small and medium-sized businesses, employment aid, and incentives to buy environment-friendly goods.
The Japanese government will report slower economic growth for the July-September quarter than the 4.8 percent estimated previously when it announces revised figures on Dec. 9, the Nikkei newspaper said, without saying where it got the information.
Biggest Threat
“Right now, the biggest threat for the economy is the strengthening yen, while deflation also poses a very severe risk,” said Yoshimasa Maruyama, senior economist at Itochu Corp. in Tokyo. “The government is mindful of next year’s election and will want to spur employment because that’s what matters to voters the most.”
The yen climbed to a 14-year high against the dollar last week and has averaged 93.84 this year, the strongest since currencies began trading freely in 1971. That has weighed on the Topix, making its 3.5 percent gain in 2009 the lowest return among the world’s 40 largest stock markets.
Takefuji Corp., a consumer lender, tumbled 9.4 percent to 386 yen. The company is limiting loans because it has difficulty finding funds, the Asahi newspaper said, citing a company executive it didn’t identify.
Mitsui Fudosan Co., a property developer, dropped 1.1 percent to 1,579 yen after having its rating cut to “underperform” from “outperform” at Mizuho Securities Co.
In Hong Kong, Tianda Oil Pipe tumbled 6.8 percent to HK$4.24. The oil-pipe maker said it plans to raise a net HK$196 million ($25 million) to fund a production line by placing 50.3 million new shares at a 12 percent discount.
Brilliance China Automotive Holdings Ltd. slumped 7.4 percent to HK$2.25 after saying its controlling shareholder will cut its stake in the automaker to 45.35 percent from 55.38 percent.
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
Last Updated: December 4, 2009 05:33 EST
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