Last Updated- Nov 24, 2009 11:13 - - 0 Comments


Asian stocks fall on share-sale concerns

StocksAsian stocks fell, led by Chinese and Japanese banks, on concern they will be forced to raise more capital. The dollar and the yen rose as investors pared bets on higher-yielding assets.

The MSCI Asia Pacific Index lost 0.9 percent to 116.67 at 4:29 p.m. in Tokyo as the Nikkei 225 Stock Average sank 1 percent in its longest losing streak since July. Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. slumped at least 3 percent after Standard & Poor’s said they were among banks with the weakest capital. Europe’s Dow Jones Stoxx 600 Index slipped 0.6 percent to 246.96, led by banks. Futures on the Standard & Poor’s 500 Index lost 0.3 percent.

Investors retreated from riskier assets today as Japan’s Finance Minister Hirohisa Fujii said monetary policy is key to fighting deflation, signaling the central bank should do more to stem price declines. Stocks in MSCI’s Asian gauge are priced at 1.5 times the net worth of assets, near the highest levels since September 2008. A global rally yesterday drove the MSCI World Index up by the most in two weeks.

“Markets have had a huge run on expectations of a recovery,” said Matt Riordan, who helps manage about $5.1 billion at Paradice Investment Management in Sydney. “We’re in a period now where signals that the recovery has been priced in are coming through. The market is discriminating a lot more.”

Financial companies were the biggest drag on the MSCI Asia Pacific Index. Sumitomo Mitsui, Japan’s second-largest bank by market value, lost 4.4 percent to 2,690 yen after the Nikkei newspaper said the country’s banks are preparing a new round of share sales. Mitsubishi UFJ sank 3 percent to 458 yen.

Seeking Haven

Lloyds Banking Group Plc is expected to price its 13.5 billion-pound ($22.4 billion) rights offering at 36 pence a share today, keeping the discount at the narrowest level of the price range outlined in the prospectus this month, Financial Times reported. UBS AG dropped 2.4 percent to 16.1 Swiss francs. Deutsche Bank AG, Germany’s largest bank, fell 1.6 percent to 50.13 euros.

The Hang Seng Index dropped 1.5 percent to 22,423.14, having surged 100 percent from this year’s low on March 9. Bank of China Ltd., the nation’s No. 3 lender, dropped 4 percent to HK$4.62. The bank said it is studying “various options” to replenish capital in order to ensure sustainable growth. China Construction Bank Corp., the nation’s second-biggest bank, slid 3.4 percent to HK$7.15.

China Stocks

The Shanghai Composite Index dropped 3.5 percent, the biggest loss in almost three months, on concern the recent rally outpaced prospects for earnings growth. SAIC Motor Corp. dropped 4.6 percent, paring a monthly advance to 15 percent and Suning Appliance Co., the nation’s biggest home appliance retailer, fell 5.5 percent from an 18-month high.

“Share prices have gained too quickly and earnings have yet to catch up with the rally,” said Xu Lirong, a Shanghai- based fund manager at Franklin Templeton Sealand Fund Management Co., which oversees about $2.6 billion.

The U.S. government’s revised figures for third-quarter gross domestic product, due today, may show the world’s largest economy expanded at a 2.8 percent annual rate, compared with the 3.5 percent estimated last month, according to the survey. The revision will reflect a bigger trade gap and weaker retail sales in September, economists said.

Home Prices

The S&P/Case-Shiller home-price index declined 9.1 percent from September 2008 after an 11.32 percent year-over-year decrease a month earlier, according to the median forecast in a Bloomberg News survey. A separate report today may show consumer confidence slipped this month.

The dollar and yen rose against all the rest of the 17 most-traded currencies tracked by Bloomberg. The dollar climbed 0.4 percent to $1.4904 to the euro, while the yen rose 0.3 percent to 132.15 against the European currency.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, added 0.4 percent to 75.347. The gauge sank as much as 0.9 percent yesterday.

Japanese bonds signaled growing expectations for deflation. The eight-year breakeven rate, or the yield differential between conventional and inflation-protected Japanese government securities, fell two basis points to minus 1.14 percentage points today. That suggests traders expect consumer prices to decline an average 1.14 percent over the next eight years.

Consumer Prices

“There’s no doubt that this deflation has been caused by weak demand,” Finance Minister Fujii said at a news conference in Tokyo today.

Asian currencies fell, led by the Philippine peso and Indonesia’s rupiah, on speculation central banks in the region will favor slower rates of appreciation to support exporters. The peso dropped 0.3 percent against the dollar to 47.04, while the rupiah fell 0.6 percent to 9,513. Malaysia’s ringgit lost 0.4 percent to 3.388.

The cost of protecting Asia-Pacific corporate and sovereign bonds from default declined as investors bet on improved creditworthiness in the region. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 2 basis points to 105.5 basis points in Singapore, Deutsche Bank AG prices show. iTraxx risk benchmarks in Japan and Australia also fell.

Default Swaps

Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or cash equivalent. A basis point, or 0.01 percentage point, is equivalent to $1,000 a year on a contract protecting $10 million of debt.

Gold for immediate delivery fell 0.1 percent to $1,164 an ounce, trading below its $1,174 record reached yesterday. Gold is up 32 percent this year as the Dollar Index fell 7.5 percent.

“With the kind of price rise we’ve seen in the past two weeks, there’s bound to be small corrections along the way, especially when the dollar shows signs of resilience,” said Steven Zhu, head trader at Shanghai Tonglian Futures Co.

Crude oil traded at $77.49 a barrel after failing to break through resistance at $80 a barrel and before a government report expected to show U.S. supplies rose last week as fuel demand weakened, according to a Bloomberg News survey.

Source: Bloomberg

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