Asian Stocks Fall to Three-Week Low as Yen Gains on Japan GDP

Most Asian stocks fell while the yen strengthened after Japan’s economy expanded more slowly than economists had estimated, curbing demand for higher-yielding assets. Copper futures rallied.

The MSCI Asia Pacific Index lost 0.1 percent to 117.77 as of 3 p.m. in Tokyo, paring losses that sent the gauge to a three-week low as Chinese shares climbed a second day. Futures on the Standard & Poor’s 500 Index gained 0.2 percent, while those for the Euro Stoxx 50 Index added 0.3 percent. The yen advanced against all of its 16 major counterparts while the won and ringgit weakened. Copper gained after Goldman Sachs Group Inc. recommended invest in raw materials.

Japan’s gross domestic product expanded at an annualized 0.4 percent rate in the three months to June 30, the Cabinet Office said today, lower than all economist estimates gathered by Bloomberg News. National Strategy Minister Satoshi Arai said the government needs to work with the central bank to tackle gains in the yen that risk derailing Japan’s export-led recovery.

“The outlook for economies worldwide is getting worse,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Equities are sliding, with risk aversion prevailing and the yen and the dollar being bought.”

About five stocks declined for every four that advanced in the MSCI Asia Pacific, which earlier touched the lowest since July 22. Japan’s Nikkei 225 Stock Average dropped 0.6 percent and South Korea’s Kospi index slipped 0.2 percent. China’s Shanghai Composite Index gained 1.9 percent, the most this month, as higher commodity-freight rates boosted shipping companies and rising power demand drove energy producers higher.

Sony, BHP

Sony Corp., which gets 22 percent of sales in the U.S., sank 3 percent, while Honda Motor Co., which generates more than 80 percent of its revenue abroad, retreated 0.9 percent in Tokyo. BHP Billiton Ltd., the world’s largest mining company, dropped 1.3 percent.

“Risk sentiment is weakening on increasing concerns about global growth,” said Kazumasa Yamaoka, a senior analyst at investment advisory company GCI Capital Co. in Tokyo.

Hong Kong developer shares declined after the city tightened mortgage lending rules and said it would boost land supply to cool land prices. Sino Land Co., the worst performer on the Hang Seng Property Index this month, lost 1.7 percent. Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer, plunged 4 percent.

China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, jumped by the 10 percent daily limit as the Baltic Dry Index gained for a seventh day. China Shenhua Energy Co., the nation’s largest coal producer, rose 3.8 percent as the company stepped up output amid increasing power consumption.

‘Soft Landing’

“There’s a low possibility that China’s economy will have a double-dip and a soft landing is very likely,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. “That’ll provide support for a continuing stocks rebound.”

Health-care stocks jumped, led by Hualan Biological Engineering Inc.’s 6.2 percent advance, on speculation the government will boost industry spending.

Zhongjin Gold Corp., the second-largest bullion producer, advanced 1.5 percent as prices for the precious metal increased for a third day. Gold for immediate delivery added 0.3 percent to $1,219.60 an ounce.

“The wilting global economy is bringing investors back to the gold market,” said Park Hyun Seon, a Seoul-based trader with Eugene Investment & Futures Co.

Intervention Prospects

The yen traded at 109.83 per euro in Tokyo from 109.92 in New York on Aug. 13. The dollar was at $1.2792 per euro from $1.2754 in New York when it reached $1.2750, the strongest since July 22. The greenback fell to 85.86 yen from 86.20 last week. It touched 84.73 yen on Aug. 11, the weakest since July 1995.

“There is a chance the yen will reach an all-time high and stay at that level for the time being,” Eisuke Sakakibara, formerly Japan’s top currency official, said yesterday on the Fuji television network. The yen peaked at 79.75 per dollar in April 1995.

Lawmakers from Japan’s ruling party last week urged Prime Minister Naoto Kan to consider intervening in the currency market, and for the Bank of Japan to “engage in large-scale monetary easing.”

“Speculation about possible policy action in Japan will make it difficult to test further upside of the yen for now,” said Tomohiro Nishida, a Tokyo-based foreign-currency dealer at Chuo Mitsui Trust & Banking Co.

The yen typically strengthens in times of financial and economic turmoil because Japan’s trade surplus frees the nation from dependence on overseas capital.

Copper Gains

U.S. retail sales rose in July by less than economists had forecast and core consumer prices grew at a rate that matched the smallest year-over-year gain in 44 years, government reports showed on Aug. 13. The ZEW Center for European Economic Research’s index of German investor and analyst expectations fell for a fourth month, a survey of economists showed ahead of tomorrow’s data.

South Korea’s won dropped 0.3 percent to 1,187.30 per dollar and Malaysia’s ringgit fell 0.3 percent to 3.1790. Overseas investors trimmed their holdings of Korean shares for a fourth day. The Bank of Korea last week held off from adding to July’s interest-rate increase, citing concern about slowing growth in the leading economies of the world.

“Weakness in Japan, a major pillar of the world economy, is quickening demand for safer assets,” said Yun Se Min, a currency dealer at Busan Bank in Seoul. “That may mean more demand for U.S. dollars and less for the Korean won.”

Copper for three-month delivery advanced as much as 1.3 percent to $7,250.25 per metric ton in London. Goldman Sachs said demand from emerging markets and limited growth in supplies will help to support raw-materials prices.

The bank reiterated an “overweight” recommendation on commodities, analysts led by Allison Nathan and Jeffrey Currie wrote in a report, recommending crude oil, gold, copper, zinc and platinum.

To contact the reporter for this story: Rocky Swift in Tokyo at rswift5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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