FXI: Asian Stocks Fall the Most in a Month on Concern Over Stimulus
By Shani Raja
March 22 (Bloomberg) -- Asian stocks fell the most in a month on concern the region’s central banks will boost efforts to curb inflation, and after an International Monetary Fund official said economies will struggle to tackle public debt.
BHP Billiton Ltd., the world’s largest mining company, lost 1.4 percent in Sydney as commodity prices slumped after India’s central bank unexpectedly raised interest rates last week. PetroChina Co., the nation’s biggest energy producer, dropped 2.7 percent in Hong Kong after agreeing to take over Australia’s Arrow Energy Ltd. Posco, Asia’s biggest maker of stainless steel, sank 3.3 percent in Seoul on speculation global demand will slow.
“Investors are increasingly jittery about the inflationary outlook and high levels of sovereign debt,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The IMF’s comments switch the spotlight to a medium-term limitation of the global economy.”
The MSCI Asia Pacific ex Japan Index fell 1.5 percent to 415.27 as of 7:24 p.m. in Tokyo, its biggest drop since Feb. 19. About four times as many stocks declined as advanced. The gauge gained 1.3 percent last week after the U.S. Federal Reserve pledged to keep borrowing costs near zero for an “extended period” and as the Bank of Japan expanded a bank-loan program.
Hong Kong’s Hang Seng Index fell 2.1 percent, the biggest decline among Asia-Pacific equity benchmarks, as developers dropped after Beijing suspended some land sales. South Korea’s Kospi Index lost 0.8 percent, Australia’s S&P/ASX 200 Index fell 0.9 percent, and China’s Shanghai Composite Index gained 0.2 percent. Japan’s markets were closed today for a holiday.
Rate Surprise
Futures on the Standard & Poor’s 500 Index fell 0.8 percent. The gauge declined 0.5 percent on March 19 as India’s surprise rate decision that day spurred speculation that withdrawal of economic stimulus policies will curtail global growth. India’s central bank raised interest rates for the first time in almost two years, saying that controlling price-gains was imperative after inflation accelerated to a 16-month high.
“India raising rates is seen as a precursor to other big- spending economies tightening fiscal measures, and we know how traders will react to that,” said Chris Weston, a Melbourne- based research analyst at IG Markets. “The narrative from the IMF shows it’s going to be a bumpy ride for 2010, but the potential pullback should also entice some fresh investment opportunities.”
‘Acute’ Challenges
Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures won’t come close to bringing deficits back to prudent levels, John Lipsky, first deputy managing director of the International Monetary Fund, said in a speech yesterday at the China Development Forum in Beijing.
Materials-related companies fell the most among the 10 industry groups in the MSCI Asia Pacific ex Japan Index after crude oil retreated the most in three weeks in New York on March 19, slumping 1.9 percent to settle at $80.68 a barrel and copper futures dropped 0.7 percent to $3.3725 a pound.
BHP Billiton dropped 1.4 percent to A$42.59, and Rio Tinto Group, the world’s third-biggest mining company, lost 1.5 percent to A$75.03. Jiangxi Copper Co., China’s biggest producer of the metal, slipped 1.9 percent to HK$16.52 in Hong Kong.
Cnooc Ltd., the country’s biggest offshore oil explorer, sank 2.7 percent to HK$12.32, while in Sydney, Santos Ltd., Australia’s No. 3 oil and gas producer, dipped 1.2 percent to A$14.08. PT Bumi Resources, Asia’s largest exporter of power- station coal, fell 9.7 percent to 2,325 rupiah in Jakarta.
Commodities, Valuations
PetroChina slumped 2.7 percent to HK$8.97. The company and Royal Dutch Shell Plc agreed to buy Australian coal-seam gas producer Arrow Energy after raising their offer to A$3.5 billion ($3.2 billion). Arrow fell 3.6 percent to A$5.10 in Sydney.
Shipping lines dropped after the Baltic Dry Index, a measure of freight rates for commodities, had its first weekly decline in five weeks. Orient Overseas (International) Ltd., Hong Kong’s biggest container line, retreated 6 percent to HK$54.50. Hanjin Shipping Co., South Korea’s largest container- box carrier, lost 4 percent to 30,000 won.
Today’s drop in the MSCI Asia Pacific ex Japan Index wiped out its increase this year. Concern that governments will withdraw policies that have fueled economic growth, and that Greece will struggle to curb its deficit, has offset optimism from reports showing improving U.S. manufacturing and employment.
Shares in the Asian gauge trade at 14.4 times estimated earnings, compared with 15.1 times for the MSCI World Index. The world index has risen 1.5 percent this year.
‘Cause for Optimism’
“There is still cause for optimism,” said Pengana’s Schroeders. “Valuations overall remain attractive, bolstered by increasing levels of merger-and-acquisition activity as consolidation amongst companies in certain sectors continues.”
Posco sank 3.3 percent to 529,000 won in Seoul, while in Hong Kong, Aluminum Corp. of China Ltd. lost 4.1 percent to HK$8.06. Baoshan Iron & Steel Co., China’s largest publicly traded steelmaker, declined 1.1 percent to 8.19 yuan in Shanghai. BlueScope Steel Ltd., Australia’s biggest steelmaker, retreated 2.5 percent to A$2.75 in Sydney.
China Overseas Land & Investment Ltd., a developer controlled by China’s construction ministry, sank 3.8 percent to HK$16.32 in Hong Kong. Hang Lung Properties Ltd., which gets about 40 percent of sales from China, retreated 4.6 percent to HK$30.35 and was the biggest drop in the Hang Seng Index.
Beijing halted a land transaction in the city’s central business district as regulators decided to suspend some purchases to stabilize the property market, the Beijing News reported today, citing the Beijing Land Coordination and Reservation Center.
China’s property prices rose at the fastest pace in almost two years in February, fueling concern record lending and inflows of capital from abroad are creating asset bubbles in the world’s third-biggest economy.
“Record property prices in cities like Beijing and Shanghai are prompting the government to do something,” said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment Trust, which oversees about $77 billion in assets. “China is relying primarily on administrative measures to cool the property market and is delaying raising interest rates.”
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
Last Updated: March 22, 2010 06:26 EDT
