August 27, 2010, 8:38 PM EDT
By Jonathan Burgos and Kana Nishizawa
Aug. 28 (Bloomberg) -- Asian stocks slumped, dragging the MSCI Asia Pacific Index to its second drop in three weeks, as a record plunge in U.S. home sales and slowing export growth in Japan added to evidence the global recovery is faltering.
Canon Inc., which makes 78 percent of its sales outside Japan, retreated 2.8 percent. James Hardie Industries SE, the biggest seller of home siding in the U.S., dropped 2.6 percent. LG Electronics Inc., the world’s third-largest mobile-phone maker, slumped 7.7 percent as consumer sentiment in its home market in South Korea declined. China Life Insurance Co., the nation’s No. 1 insurer, tumbled 9.8 percent after Citigroup Inc. said first-half earnings were “weak.”
“The U.S. economy now seems to be weaker than markets expected,” said Stephen Halmarick, who helps manage about $135 billion as head of investment markets research at Colonial First State Global Asset Management in Sydney. “Investors are worried growth will fade sharply and that an improvement in company profits will reverse.”
The MSCI Asia Pacific Index dropped 1.2 percent to 116.82 this week, following last week’s 0.4 percent gain. The index has slumped about 9.5 percent from its high this year on April 15 as Europe’s debt crisis, China’s measures to curb property-price inflation and disappointing economic reports in the U.S. fueled concern global growth may stall.
Nikkei Slump
Japan’s Nikkei 225 Stock Average slumped 2.1 percent as Japan’s export growth slowed last month, adding to risks in an economy already under threat by the yen’s appreciation. The Shanghai Composite Index dropped 1.2 percent as shares of developers dropped on speculation the government will introduce a property tax.
Australia’s S&P/ASX 200 Index fell 1.4 percent as Australian business investment unexpectedly fell in the second quarter and neither Prime Minister Julia Gillard nor opposition leader Tony Abbott gained an outright majority in last weekend’s national election. South Korea’s Kospi Index fell 2.6 percent as South Korea’s consumer confidence fell for the first time in five months, according to a Bank of Korea on Aug. 25.
Shares of technology companies and raw material suppliers posted the biggest decline among 10 industry groups on the MSCI Asia Pacific Index this week.
Canon declined 2.8 percent to 3,500 yen. Sony Corp., the maker of Bravia Televisions, decreased 3.9 percent to 2,439 yen. Toshiba Corp., the world’s second-biggest maker of flash memory chips, slipped 3.1 percent to 409 yen.
Japan’s Exports
Japanese exporters declined after the yen advanced to a 15- year high against the dollar on Aug. 25 as economic growth concerns boosted demand for refuge assets. A stronger yen reduces overseas income at Japanese companies converted into their home currency. Japan’s export growth slowed for a fifth month in July, government data release on Aug. 25 showed. Prime Minister Naoto Kan said yesterday the government is ready to take “bold” action in the currency market when necessary.
Kan said volatile foreign exchange movements are harmful to economic and financial stability. He said the government will compile an outline of its stimulus plan on Aug. 31.
In Seoul, LG Electronics tumbled 7.7 percent to 96,000 won. Samsung Electronics Co., Asia’s biggest maker of semiconductors, lost 2.3 percent to 766,000 won. South Korea’s consumer confidence index was 110 in August, down from July’s 112, the Bank of Korea said in an e-mailed statement in Seoul on Aug. 25. The reading hit a seven-year high of 117 in October. A number exceeding 100 indicates optimists outnumber pessimists.
Disappointing U.S. Data
Disappointing economic data from the U.S., one of biggest markets for Asia’s exports, sparked concern shipment of goods from the region will weaken.
“The U.S. is a big consumer of goods manufactured in Asia,” said Prasad Patkar, who helps manage $1.6 billion at Platypus Asset Management in Sydney. “Weakness in the U.S. implies softer demand for Asian exports, which weighs down on growth in the region.”
James Hardie, which gets about 72 percent of sales from the U.S., declined 2.6 percent to A$5.31. Billabong International Ltd., the world’s biggest publicly traded surfwear maker, slumped 7 percent to A$7.47 after forecasting earnings that missed analyst estimates.
Waning Stimulus
“The effects of the stimulus measures are waning in the U.S. and fears about the global economic recovery are increasing,” said Tomomi Yamashita, a fund manager in Tokyo at Shinkin Asset Management Co., which oversees $6 billion. “The U.S. housing data showed some bad results and the risk of a double-dip recession is growing. No one wants to take risks right now.”
In Hong Kong, China Life tumbled 9.8 percent to HK$30.10. Citigroup cut its share-price forecast by 12 percent to HK$36.20 and maintained its “hold” rating, saying the company’s first- half earnings were weak.
PCCW Ltd., Hong Kong’s biggest phone carrier, plunged 7.9 percent to HK$2.58. The company said it will sell HK$1.3 billion ($167 million) of new stock at a discount to reduce debt.
Poly Real Estate Group Co., China’s second-biggest developer, slipped 3.4 percent to 12.07 yuan in Shanghai. Country Garden Holdings Co., the property developer controlled by China’s second-richest woman, declined 4.2 percent to HK$2.29 in Hong Kong.
China’s property developers dropped on speculation the government will introduce a property tax. The government is planning a real estate tax reform, Xinhua reported on Aug. 24, citing Xu Lin, director of the finance department at the National Development and Reform Commission. Xu didn’t say when the plan may be implemented, the report said.
--With assistance from Shani Raja in Sydney. Editors: Nick Gentle, Paul Tighe
To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net.
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.
From Bloomberg Businessweek published on August 27, 2010, 8:38 PM EDT