July 1 (Bloomberg) -- Asian stocks dropped for the second time this week on concern share sales will dilute the holdings of equity investors and as falling commodities prices drove resource producers lower.

Orix Corp., Japan’s No. 1 non-bank lender, fell 4.8 percent after the Nikkei newspaper said it will sell stock. Frasers Commercial Trust plunged 13 percent in Singapore after the office landlord said it would sell shares at a discount. BHP Billiton Ltd., the world’s largest mining company, sank 2.4 percent as oil and metals fell. Baoshan Iron & Steel Co. jumped 4.4 percent as Chinese manufacturing rose for a fourth month.

The MSCI Asia Pacific Index lost 0.2 percent to 103.03 as of 5:59 p.m. in Tokyo, after swinging between gains and losses. The measure rallied 15 percent in the first half of 2009, the best start to a year since 1999 and outpacing gains by gauges in Europe and the United States.

“I’m expecting to see more companies sell shares,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management, which oversees the equivalent of $90 billion. “China’s economy is on its feet again, thanks to government stimulus measures.”

Japan’s Nikkei 225 Stock Average retreated 0.2 percent. The Tankan index of business confidence came in below economist forecasts, yet still showed the first improvement in sentiment in more than two years. The gauge of large manufacturers rose to minus 48 in June from minus 58 in March, the Bank of Japan said today. Economists surveyed by Bloomberg News had predicted a reading of minus 43.

Australia Manufacturing

Australia’s S&P/ASX 200 Index dipped 2.1 percent, the region’s largest drop. The nation’s manufacturing industry contracted for a 13th month in June, a survey showed. Home- building permits fell 12.5 percent from April, compared with forecasts for a 3 percent increase.

China’s Shanghai Composite Index was the region’s best performer, climbing 1.7 percent, led by industrial companies. Hong Kong’s market was shut today for a public holiday.

Futures on the Standard & Poor’s 500 Index increased 0.8 percent. The index declined 0.9 percent yesterday as the Conference Board’s index of consumer confidence unexpectedly slipped to 49.3 last month from a revised 54.8 in May. Economists had expected the gauge would rise to 55.3.

U.S. stocks were also hit by a government report that delinquency rates on the least risky mortgages more than doubled in the quarter ended March 31 from a year earlier, suggesting job losses pushed more Americans toward foreclosure.

Share Sales

“The disappointing numbers were a sobering reminder that we’re still in for a tough second half of the year,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “This downturn in confidence pushes the recovery story back, and has certainly led to a more defensive stance for traders.”

Orix fell 4.8 percent to 5,530 yen. The stock rose as much as 7.2 percent yesterday after Orix registered to sell 700 billion ($7 billion) in bonds, raising speculation it wouldn’t need to issue shares. A 100 billion yen stock sale would increase the company’s shares by 20 percent, Nikkei said.

The newspaper also reported All Nippon Airways Co., Asia’s No. 2 airline, would sell shares to fund plane purchases. ANA said after the close it would sell as much as 183 billion yen in stock. Its shares fell 5.9 percent to 317 yen.

Frasers Commercial Trust plunged 13 percent to 21 Singapore cents after saying it will sell stock to existing shareholders at a 60 percent discount. Hindalco Industries Ltd., India’s No. 1 aluminum producer, slumped 4.4 percent to 82.65 rupees after saying it plans to raise $500 million selling securities to institutional investors.

China PMI

Aluminum Corp. of China Ltd., China’s biggest producer of the metal, lost 0.3 percent to 12.14 yuan in Shanghai. The company said it plans to raise as much as 10 billion yuan ($1.46 billion) through the placement of up to 1 billion A-shares and to use the funds for investments.

China’s Purchasing Managers’ Index rose to 53.2 in June from 53.1 in May. A reading above 50 indicates an expansion. Another PMI, released today by CLSA Asia-Pacific Markets, also showed an expansion.

Baoshan Iron, China’s biggest steelmaker, jumped 4.4 percent to 7.35 yuan. China Railway Erju Co., a unit of the nation’s biggest construction company, surged 10 percent to 12.89 yuan.

Komatsu Ltd., the world’s second-largest maker of construction machinery, rose 1.8 percent to 1,519 yen. The machinery maker was rated “strong buy” in new coverage by Mizuho Financial Group Inc. analyst William Montgomery, who said the company will benefit from growing investment globally in infrastructure and resource development. Kubota Corp., a maker of tractors that is benefiting from increasing mechanization of agriculture in Asia, added 2.9 percent to 820 yen.

V-Shaped Recovery

“It is now safe to say that a sustainable recovery is well underway in China,” Andy Rothman, the Shanghai-based China strategist for CLSA Ltd., said in a report today. China is experiencing a V-shaped recovery, Rothman wrote.

BHP Billiton, the world’s largest mining company, retreated 2.4 percent to A$33.90. Zijin Mining Group Co., China’s largest gold producer, fell 1.5 percent to 10.05 yuan in Shanghai.

A measure of six metals traded on the London Metal Exchange, including copper and nickel, dropped 2 percent yesterday. Crude oil fell 2.2 percent.

NTT Urban Development Corp. climbed 5.5 percent to 986,000 yen, while Sumitomo Realty & Development Corp., Japan’s No. 3 real estate company, added 1.9 percent to 1,805 yen. JPMorgan Chase & Co. raised share-price targets on both companies and lifted its view on Japan’s property industry to “bullish.”

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

Last Updated: July 1, 2009 05:01 EDT