Aug. 27 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to a one-week low, after China said it may curb production in the steel and cement industries and Esprit Holdings Ltd. reported lower profit.

Rio Tinto Group, which made 19 percent of its sales last year in China, sank 3 percent in Sydney. Mitsubishi Corp., a Japanese trading company that gets more than a third of its revenue from commodities, lost 2.1 percent. Esprit, the biggest publicly traded clothier in Hong Kong, slumped 15 percent. The yen rose as speculation output cuts in China will stifle growth sparked demand for safe-haven currencies.

“The concern is that in the short term big suppliers to China will be hurt,” said Stephen Halmarick, Sydney-based head of investment-markets research at Colonial First State, which holds about $114 billion. “Any such tightening has the potential to harm global growth. It takes some of the froth off the big rally we’ve had in the market.”

The MSCI Asia Pacific Index lost 0.5 percent to 112.93 as of 7:25 p.m. in Tokyo, set for its lowest close since Aug. 21. The gauge has climbed 60 percent from a more than five-year low on March 9 on speculation government stimulus packages and lower borrowing costs will revive the global economy.

China’s Shanghai Composite Index dropped 0.7 percent, while Japan’s Nikkei 225 Stock Average fell 1.6 percent. Hong Kong’s Hang Seng Index declined 1 percent.

Studying Curbs

OZ Minerals Ltd. slumped 6.1 percent in Sydney after reporting a first-half loss. China Vanke Co., the nation’s biggest publicly traded property developer, sank 2.3 percent in Shenzhen, while chemical maker Tokuyama Corp. slumped 8 percent in Tokyo on share-sale plans. Nippon Sheet Glass Co. declined 7.2 percent after its chief executive officer resigned.

Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge was little changed yesterday as a smaller- than-estimated rise in orders for some durable goods and possible production restrictions on China’s raw-material suppliers outweighed a surge in new-home sales.

The Chinese government said yesterday it’s studying curbs on overcapacity in industries including steel and cement. It will also increase “guidance” over parts of the coal, glass and power industries, the State Council said on its Web site. Controls on stock and bond sales by companies in targeted sectors will be strengthened, it said.

The yen gained versus all of its 16 major counterparts, climbing to 93.65 per dollar from 94.26 in New York yesterday. Yields on 10-year U.S. Treasuries fell to a near six-week low.

‘Key Driving Force’

“Uncertainties about China’s policy action, aimed at tackling credit expansion, will continue to be a key driving force of the market,” said Toshiya Yamauchi, a manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. “Should the Chinese stock market struggle, the safe- haven currencies may strengthen.”

Rio sank 3 percent to A$57.16. BHP Billiton Ltd., the world’s biggest mining company, lost 1.3 percent to A$37.65. Mitsubishi dropped 2.1 percent to 1,882 yen in Tokyo. Mitsui & Co., which counts commodities as its biggest source of profit, declined 2.8 percent to 1,226 yen.

“For commodity exporters like Australia the demand from China for commodities has been one of the key reasons we’ve managed to avoid the worst of the global downturn,” said Colonial’s Halmarick.

The MSCI Asia Pacific Index has climbed 26 percent this year, more than the MSCI World Index’s 18 percent gain, amid speculation growth in countries such as China will outstrip other regions. The International Monetary Fund estimates the Chinese economy will expand 8.5 percent in 2010, compared with 2.5 percent worldwide, according to its Web site.

Lending Policies

China’s banking regulators are “tweaking” lending policies to remove “froth” from the system while growth remains the top priority for policymakers, according to Royal Bank of Scotland Group Plc.

The MSCI Asia Pacific Index’s five-month rally has lifted the average price of its companies to 24 times estimated earnings, up from 13.7 at the end of 2008. The gauge’s current valuation is higher than the Standard & Poor’s 500 Index’s 17.2 times and 15.1 times for Europe’s Dow Jones Stoxx 600 Index.

“Current prices fully reflect a possible V-shaped recovery in company earnings next year,” said Mitsushige Akino, who oversees the equivalent of $637 million at Tokyo-based Ichiyoshi Investment Management Co. “It’s still unclear whether such a recovery will indeed happen and this uncertainty is allowing speculators to dominate the market.”

Commodity Prices

OZ Minerals slumped 6.1 percent to A$1.08. The Australian copper and gold producer reported a first-half loss on the sale of $1.6 billion of mines.

Material producers were the second-biggest drag on the MSCI Asia Pacific Index today following declines in commodity prices. Crude oil slipped 0.9 percent to $71.43 a barrel in New York yesterday, the lowest settlement since Aug. 18, and a gauge of six metals in London fell for a second day, dropping 0.8 percent.

Esprit tumbled 15 percent to HK$50.90. The company said it may take until next year to return to profit growth after reporting its first earnings drop in more than a decade.

About 19 percent of the 570 companies in the MSCI Asia Pacific Index that have reported net income since early July have missed analyst estimates, according to data compiled by Bloomberg. A third has beaten predictions.

Share Sales

In Shenzhen, China Vanke fell 2.3 percent to 10.70 yuan after saying it plans to raise as much as 11.2 billion yuan ($1.6 billion) by selling additional shares.

Tokuyama slumped 8 percent to 672 yen in Tokyo. The company is aiming to raise 49.9 billion yen ($532 million) from a share sale to finance the construction of a polysilicon manufacturing plant in Malaysia.

Nippon Sheet dropped 7.2 percent to 334 yen. Morgan Stanley cut its rating on the stock to “equal-weight” from “overweight,” saying the unexpected resignation of CEO Stuart Chambers will lead to uncertainty.

In Sydney, James Hardie Industries NV, the biggest seller of home siding in the U.S., rose 2.5 percent to A$7.31. Sales of new homes in the U.S. jumped 9.6 percent in July, the most in four years, a government report showed.

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

Last Updated: August 27, 2009 06:33 EDT