Asian Stocks Fall on Europe Debt Concern; Canon, Banks Slump

Asian stocks slumped, dragging the MSCI Asia Pacific Index down the most in three months and erasing its 2010 gain on concern the European debt crisis and Chinese property curbs will hurt the global recovery.

Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 3.1 percent in Tokyo. China Vanke Co., the country’s largest listed developer, fell 4.1 percent as brokerages said home prices may drop 30 percent. Korea Zinc Co., the world’s second-biggest zinc refiner, sank 5.7 percent in Seoul as commodity prices declined yesterday. Westpac Banking Corp. sank 4.2 percent on brokerage downgrades.

The MSCI Asia Pacific Index dropped 2.4 percent to 119.80 as of 7:23 p.m. in Tokyo, the steepest decline since Feb. 5. The gauge has risen 4.9 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 sank 3.3 percent, the biggest drop since March 2009, 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.

‘Contagion Effects’

China’s Shanghai Composite Index slumped 4.1 percent and Hong Kong’s Hang Seng Index lost 1 percent. Australia’s S&P/ASX 200 Index declined 2.2 percent, while South Korea’s Kospi Index slumped 2 percent.

Futures on the Standard & Poor’s 500 Index rose 0.3 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 0.5 percent for the year. Companies in the measure trade at an average of 1.55 times book value, compared with about 1.5 times at the index’s February low, Bloomberg data show.

Canon, the world’s biggest maker of digital cameras, lost 3.1 percent to 4,220 yen in Tokyo. Asahi Glass Co., which receives about 20 percent of revenue from Europe, dropped 4.6 percent to 1,071 yen. Toyota Motor Corp., the world’s biggest automaker, fell 3.1 percent to 3,550 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 118.86 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.”

Property Curbs

China Vanke dropped 4.1 percent to 7.18 yuan. China’s home prices may slump 30 percent as local authorities implement government measures to crack down on property speculation, according to brokerages including China Jianyin Investment Securities Co.

Vanke shares fell even after the company reported higher property sales for April. Poly Real Estate Group Co. fell 6.7 percent to 10.66 yuan in Shanghai. Hang Lung Properties Ltd., a developer that generated 40 percent of its fiscal 2009 revenue in China, sank 1.3 percent to HK$27.30 in Hong Kong.

Evergrande Real Estate Group Ltd., China’s second-biggest developer by sales, tumbled 10 percent to HK$2.61. The company will cut prices for its properties across China, the Shanghai Securities News reported.

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.

Mining Shares Drop

“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.”

In Seoul, Korea Zinc tumbled 5.7 percent to 181,000 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.

BHP Billiton Ltd., the world’s largest mining company, lost 2.9 percent to A$37.60, while Rio Tinto Group, the world’s third-biggest mining company, sank 3.8 percent to A$65.69 in Sydney. 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 1.5 percent to A$44.03.

Bank Earnings

Westpac Banking, which yesterday expressed caution on the outlook for profit growth, slumped 4.2 percent to A$25.10. 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 3.4 percent to A$25.86 after saying fiscal first-half profit tumbled 21 percent. Finance companies accounted for 31 percent of the MSCI Asia Pacific Index’s decline today.

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.

AU Optronics Corp., Taiwan’s second-largest flat-panel maker, lost 4.3 percent to NT$33.50 in Taipei, while LG Display Co., the world’s No. 2 liquid-crystal display maker, slumped 2.4 percent to 45,000 won in Seoul after a division of America Movil SAB sued the companies for price fixing. Japan’s Sharp Corp., which is also being sued, slid 4.3 percent to 1,173 yen.

Genting Singapore

Among stocks that advanced, Dena Co. surged 6 percent to 815,000 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 4.4 percent to 95 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.”

Thanks To : BUSINESSWEEK

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