Asian Stocks Decline on Europe Debt Concerns, South Korea Artillery Drill
Asian stocks dropped for a third time in four days as concern mounted Europe’s debt crisis will spread and as South Korea proceeded with an artillery drill that has prompted threats of retaliation from North Korea.
HSBC Holdings Plc, Europe’s biggest lender by market value, fell 1.1 percent in Hong Kong. Ricoh Co., a producer of office equipment that gets 23 percent of sales from Europe, declined 1.9 percent in Tokyo. Sony Corp. dropped 1.2 percent after the maker of Bravia televisions said sales of TVs will fall short of its target in the full-year. Santos Ltd., Australia’s third- largest oil and gas producer, jumped 4.1 percent after agreeing to sell part of its Australian gas project.
“Europe’s debt problems are continuing to affect risk appetite,” said Yoji Takeda, who helps manage about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “There’s also a slight concern on escalating tensions in the Korean peninsula, though it’s unlikely to develop into a major skirmish. Asian equities are still attractive given the region’s strong economic growth.”
The MSCI Asia Pacific Index fell 0.3 percent to 133.20 as of 8 p.m. in Tokyo, with more than two stocks declining for each that advanced. The gauge climbed to a 2 1/2-year intraday high on Dec. 14 as U.S. economic reports boosted confidence in a global recovery, easing concerns that Europe’s debt crisis and China’s measures to slow inflation will hurt growth.
South Korea’s Kospi Index declined 0.3 percent, paring earlier losses of as much as 1.5 percent. The government went ahead with a live-firing drill on Yeonpyeong Island, a month after North Korea shelled the island close to a disputed sea border off the peninsula’s west coast, killing four people.
Japan’s Nikkei 225 Stock Average dropped 0.9 percent. China’s Shanghai Composite Index declined 1.4 percent and Hong Kong’s Hang Seng Index slid 0.3 percent. Australia’s S&P/ASX 200 Index lost 0.6 percent. India’s Sensitive Index gained 0.1 percent.
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge rose 0.1 percent in New York on Dec. 17 to 1,243.91, its highest close since September 2008, as better- than-projected earnings forecasts at Oracle Corp. and Research In Motion Ltd. plus the takeover of a regional bank overshadowed concern Europe’s debt crisis will spread.
European stocks fell on Dec. 17 as an agreement among the region’s leaders to create a crisis-management mechanism failed to ease concern that some euro-area nations can’t repay their debts. Ireland’s credit rating was cut five levels by Moody’s Investors Service on Dec. 17.
HSBC dropped 1.1 percent to HK$79.25. Standard Chartered Plc, the British bank that receives three quarters of earnings from Asia, slipped 1.7 percent to HK$210 in Hong Kong.
“The concern for investors with Europe is that you will continue to see sovereign-debt blowups that could impact the global economy,” said Don Williams, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney
A gauge of information-technology companies had the second- biggest decline among 10 industry groups in the MSCI Asia Pacific Index.
Ricoh slipped 1.9 percent to 1,168 yen in Tokyo. HTC Corp., the Taiwanese handset maker that counts Europe as its second- biggest market after America, declined 0.8 percent to NT$865. LG Display Co., the world’s No. 2 flat-screen panel maker that gets about 18 percent of sales from Europe, sank 2.6 percent to 39,200 won in Seoul.
Sony TV Target
Sony Corp., the world’s third-largest maker of TVs, fell 1.2 percent to 2,930 yen. Sales of televisions in the year ending March 31 may miss a target of 25 million units by a “little bit,” Vice President Hiroshi Yoshioka said today, without elaborating.
Drugmakers in China tumbled after the Economic Observer reported that the government may cut medicine prices by an average of 40 percent.
Kangmei Pharmaceutical Co. sank 4.6 percent to 21.15 yuan in Shanghai. Beijing Tiantan Biological Products Corp. retreated 2.8 percent to 23.22 yuan while North China Pharmaceutical Co. dropped 2.6 percent to 16.46 yuan.
Shares of bulk-shipping companies fell after the Baltic Dry Index of shipping rates for commodities decreased 1.4 percent in London on Dec. 17 to its lowest level since Aug. 5, extending its decline to a ninth day.
China Cosco Holdings Ltd., China’s biggest dry-bulk carrier, dropped 1.2 percent to HK$8.03 in Hong Kong. STX Pan Ocean Co., South Korea’s largest, declined 2.6 percent to 11,400 won. Hyundai Merchant Marine Co. decreased 4.6 percent to 39,750 won.
Japan to Rally?
The MSCI Asia Pacific Index increased 11 percent in 2010 through Dec. 17, compared with gains of 12 percent by the S&P 500 and 9 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 14.7 times estimated earnings on average at the close on Dec. 17, versus 14.6 times for the S&P 500 and 12.3 times for the Stoxx 600.
Japan’s Nikkei 225 has underperformed the regional benchmark as it has fallen 2.3 percent this year through Dec. 17, according to Bloomberg data. Kathy Matsui, chief Japan equity strategist for Goldman Sachs Group Inc. in Tokyo, is telling clients to buy automakers and technology producers because profits will rise as the yen retreats against the dollar after reaching a 15-year high in October.
“Many investors make the mistake of becoming too emotionally hung up on Japan’s structural problems, and therefore they miss the cyclical opportunities,” said Matsui, 45, who has covered Japanese equities for 20 years. “If you have the stars aligned with a better U.S. economy, a weaker yen, earnings going back to 2007 peaks and very underweight foreign investors, that could easily deliver 15 to 20 percent.”
Among stocks that advanced, Santos climbed 4.1 percent to A$13.50. The company will raise A$665 million ($658 million) selling a 15 percent stake in its Gladstone liquefied-natural- gas project to Total SA and Korea Gas Corp. It just completed a share sale to institutional investors, raising A$500 million.
Taiwanese airlines advanced after the Economic Daily News reported that the island may raise the daily limit of Chinese tourist arrivals to 4,000 from 3,000. The newspaper didn’t say where it got the information. Liu Te-shun, Vice-chairman of Taiwan’s Mainland Affairs Council, didn’t immediately answer calls to his office.
China Airlines Ltd., Taiwan’s biggest carrier, increased 1.9 percent to NT$24.80. Smaller rival EVA Airways Corp. jumped 3.9 percent to NT$36.40.
In Bombay, Hero Honda Motors Ltd., maker of half the motorcycles sold in India, surged 18 percent to 1,980.5 rupees. The company said Honda Motor Co.’s sale of its 26 percent stake in the Indian venture will lead to lower technology-royalty payments. Honda, the world’s largest motorcycle maker, agreed last week to sell its stake to Hero Group for $1.9 billion so that it could focus on developing its fully owned unit in India.
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