Asian stocks suffer biggest fall in two weeks

investmentsAsian stocks fell, giving the MSCI Asia Pacific Index its biggest drop in two weeks, as Seven & I Holdings Co. and Sekisui House Ltd. cut their profit forecasts.

Seven & I, the world’s largest convenience-store owner, and Sekisui House, Japan’s biggest home builder, dropped more than 2 percent in Tokyo. Westpac Banking Corp., Australia’s largest bank by market value, sank 2.7 percent as concern lenders will report more losses dragged U.S. financial shares lower yesterday. Elpida Memory Inc., Japan’s No. 1 memory-chip maker, tumbled 17 percent on plans to sell shares.

The MSCI Asia Pacific Index dropped 1.6 percent to 112.18 as of 2:54 p.m. in Tokyo, the most since Aug. 17. The gauge has risen 59 percent from a more than five-year low on March 9 on speculation the global economy is recovering. That’s taken the average price of stocks on the index to 1.5 times book value, close to an 11-month high.

“We remain cautious on the market,” said Pearlyn Wong, Singapore-based investment analyst at Bank Julius Baer Co., which manages $350 billion. “Much of the recovery story has been priced in. Investors are probably wondering what is going to happen once the stimulus measures end.”

Japan’s Nikkei 225 Stock Average declined 2.4 percent. Hong Kong’s Hang Seng Index lost 1.6 percent. Air China Ltd., which is listed on the city’s stock exchange, slumped 4.8 percent after the Chinese government said it will raise fuel prices.

Australia’s S&P/ASX 200 Index sank 1.7 percent even as a government report showed the country’s economy grew faster in the second quarter. BHP Billiton Ltd., the world’s largest mining company, lost 1.7 percent in Sydney after oil and copper prices slumped in New York.

Banks Decline

China’s Shanghai Composite Index lost 0.2 percent as Premier Wen Jiabao said the government will maintain a moderately loose monetary policy.

Futures on the S&P 500 Index added 0.2 percent. The gauge slid 2.2 percent yesterday, the most since Aug. 17. The KBW Bank Index of 24 U.S. financial companies fell 5.8 percent as analysts at RBC Capital Markets said U.S. banks on the West Coast still face credit deterioration and higher loan losses.

Westpac sank 2.7 percent to A$24.17. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, dropped 2.9 percent to 578 yen.

Seven & I declined 2.9 percent to 2,165 yen after cutting its full-year net income target by 11 percent. Aeon Co., Japan’s second-largest retailer, slumped 5 percent to 924 yen. Uny Co., which runs department stores, slid 4.9 percent to 753 yen.

Lower Forecast

“There are signs of recovery in certain sectors of the domestic economy, but an overall recovery seems unlikely,” Seven & I said in a filing with the Tokyo stock exchange. “Consumer sentiment remains weak.”

Sekisui House dropped 5.2 percent to 846 yen. The Osaka- based company cut its profit forecast for the year ending Jan. 31 by 68 percent to 6 billion yen ($65 million), citing the slump in the housing market.

The rally since March has been fueled by profit reports in the past month that exceeded analyst estimates. Some 35 percent of the 635 companies in the MSCI Asia Pacific Index that posted net income since early July have beaten analyst predictions, while about 21 percent have missed, according to data compiled by Bloomberg.

“The market cannot avoid instability because current share prices are based not on an actual improvement in the economy but on expectations of a relatively steep recovery in company earnings next year,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $93 billion.

Raising Capital

Maruzen Co. fell 4.5 percent to 106 yen. The bookstore operator posted a 340 million yen ($3.7 million) loss for the six months ended July 31, missing its forecast of a 10 million yen profit because of weak sales, according to a preliminary earnings statement.

In Tokyo, Elpida slumped 17 percent to 1,284 yen after saying the company will sell as much as 78.5 billion yen ($841 million) of new shares at a 7.2 percent discount to yesterday’s closing price.

Singapore’s Olam International Ltd., a supplier of agricultural commodities that is partly owned by Temasek Holdings Pte, tumbled 6.9 percent to S$2.30 after saying it sold $400 million of convertible bonds.

Material and energy companies accounted for 34 percent of the MSCI Asia Pacific Index decline today. Crude oil fell 2.7 percent to $68.05 a barrel in New York yesterday, the lowest settlement since Aug. 17. A gauge of six metals in London dropped 3.6 percent, the most since July 8.

Higher Fuel Prices

BHP Billiton lost 1.7 percent to A$36.65. Rio Tinto Group Ltd., the world’s third-largest mining company, fell 2.4 percent to A$56. Inpex Corp., Japan’s largest oil explorer, slumped 4.3 percent to 730,000 yen.

In Hong Kong, Air China, the nation’s largest international carrier, declined 4.8 percent to HK$4.33. China Southern Airlines Co., the nation’s largest carrier, lost 4.9 percent to 4.85 yuan in Shanghai.

China will raise fuel prices by 300 yuan ($44) a ton, or as much as 6.3 percent, today to reflect gains in crude oil and offset higher raw material costs, the National Development and Reform Commission said on its website.

Financial companies in China gained on speculation the government won’t tighten fiscal policy. The country’s economy is at a “critical phase” of its recovery and the government will stick to its pro-active fiscal policy, Xinhua news agency reported Premier Wen as saying.

Chinese Lending Growth

Industrial Bank Co. gained 3.53 percent to 29.91 yuan. Poly Real Estate Group Co., the country’s second-largest developer, rose 1.1 percent to 21.46 yuan.

Concern a slowdown in lending will stifle economic growth dragged the Shanghai Composite down 6.7 percent on Aug. 31, the biggest loss since June 2008 and rounding out a 22 percent decline for August.

“A loose money policy will ensure that the economic recovery is on the way, though maybe at a gradual pace,” said Dai Ming, who manages the equivalent of about $14.6 million at Shanghai King Sun Asset Management Co.

Source: Bloomberg

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