Asian Stocks Fall for Second Week; Banks Decline in China, Japan

Asian stocks fell, dragging the region’s benchmark index to its second straight weekly drop as China restricted bank lending, stoking concern anti-inflation policies may slow growth in the world’s second-biggest economy.

Industrial & Commercial Bank of China (601398) Ltd., the nation’s biggest lender, lost 1.1 percent in Hong Kong. Mitsui & Co., which gets 42 percent of sales from commodities, sank 3.1 percent in Tokyo on speculation monetary tightening in China, the world’s No. 1 user of copper and aluminum, will crimp demand. Japanese banks fell as the government said lenders may have to write off loans to Tokyo Electric Power Co., owner of a nuclear reactor crippled by the March earthquake.

The MSCI Asia-Pacific Index declined 1 percent to 136.17 this week. The gauge dropped 1.4 percent the previous week as U.S. economic data and plunging commodity prices added to signs a global economic recovery is faltering, and as the Federal Reserve prepares to end a $600 billion asset-purchase program known as quantitative easing.

“Investors are worried inflation may slow a recovery in the global economy,” said Masaru Hamasaki, who helps oversee about $17 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “That may cause a slump in global demand, trimming companies’ earnings outlooks.”

Japan’s Nikkei 225 (NKY) Stock Average fell 2.1 percent. South Korea’s Kospi index dropped 1.3 percent. Australia’s S&P/ASX 200 Index lost 0.7 percent in the week, as the statistics bureau reported the nation’s employers unexpectedly cut workers in April by the most since 2009.

Reserve Requirements

China’s lenders dropped after the nation’s central bank on May 12 raised lenders’ reserve requirements for the fifth time this year, prompting analysts from Credit Suisse Group AG to Citic Securities Co. to predict further tightening.

China’s inflation held above 5 percent in April and lending exceeded analyst estimates, signaling that further monetary tightening may be needed to cool the world’s fastest-growing major economy.

“Markets always struggle with tightening cycles,” said James Holt, Sydney-based director of BlackRock Investment Management (Australia) Ltd., which oversees about $40 billion in assets. “The China inflation data show that the country will need to do more tightening.”

Industrial & Commercial Bank of China (1398) dropped 1.1 percent to HK$6.40. Bank of China Ltd. (3988), the nation’s third-biggest lender, lost 0.5 percent to HK$4.24. China Merchants Bank Co. declined 1.7 percent to HK$19.48. Kaisa Group Holdings Ltd. (1638), a Hong Kong-based developer of properties in China, slumped 18 percent to HK$2.77.

‘Hard Landing’

“China’s reserve ratio requirement rise has been seen by some investors as adding to the risks of a hard landing,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages $98 billion in Sydney. “In my view this perception is mistaken.”

Raw material producers declined as a Bloomberg survey released this week showed global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months.

Mitsubishi Corp. (8058), which gets about 40 percent of sales from commodities, sank 4.4 percent to 2,080 yen in Tokyo. Rival Mitsui & Co. dropped 3.1 percent to 1,368 yen. BHP Billiton Ltd. (BHP), the world’s largest mining company, lost 0.6 percent to A$44.32 in Sydney, capping five straight weeks of declines.

Japanese Banks

Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded lender, fell 2.5 percent to 383 yen, while smaller rival Sumitomo Mitsui Financial Group Inc. (8316) declined 3.3 percent to 2,452 yen after Japan’s Chief Cabinet Secretary Yukio Edano told reporters that “people won’t support” using taxpayer funds for Tokyo Electric unless banks waive some loans made before the March 11 earthquake.

Tepco, as the company is known, lost 0.4 percent to 453 yen after Kyodo News reported this week that the utility found holes in the bottom of the pressure vessel of a reactor.

Hana Financial Group Inc. (086790), South Korea’s fourth-largest financial company, tumbled 14 percent to 37,850 won in Seoul after Chairman Kim Seung Yu expressed concern that his bid for Korea Exchange Bank may fail as regulators delay approval.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net;

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

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