Asian Stocks Drop for Third Week as Commodities, Japan Utilities Decline

Most Asian stocks fell, with the regional benchmark index set for a third straight weekly drop, as raw material producers declined on lower metal and oil prices utilities tumbled as Tokyo Electric Power Co. reported Japan’s biggest corporate loss in eight years.

Hyundai Motor Co. (005380), South Korea’s No. 1 carmaker, and Brambles Ltd. (BXB), the world’s largest supplier of wooden pallets, advanced at least 1.4 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, fell 1.7 percent in Sydney as oil and metal futures dropped. Kansai Electric Power Co. slumped 4.9 percent, leading declines in the Nikkei 225 Stock Average, after Tokyo Electric, owner of the nuclear reactor crippled by the March 11 earthquake and tsunami, posted a record loss.

“The market may have become oversold amid selling in the past three weeks,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages $98 billion in Sydney. “The soft patch of economic data from the U.S., along with tightening concerns in China, the recession in Japan and Europe’s debt crisis will leave a volatile environment for the market in the next few months.”

The MSCI Asia Pacific Index gained 0.1 percent to 134.82 as of 7:27 p.m. in Tokyo, after swinging between gains and losses at least 10 times. About five stocks fell for every four that rose. The gauge is heading for its third weekly drop, the longest streak of weekly declines since November.

The regional benchmark index last week recorded its second straight weekly drop amid concern that China’s anti-inflation policies may slow global economic growth and as the U.S. Federal Reserve prepares to end a $600 billion asset-purchase program known as quantitative easing.

Bank of Japan

Japan’s Nikkei 225 (NKY) Stock Average closed 0.1 percent lower. The Bank of Japan’s policy board unanimously voted to maintain monetary policy even after a report yesterday showed the country slipped into a recession following a record earthquake in March.

Taiwan’s Taiex Index lost 0.6 percent. Australia’s S&P/ASX 200 Index dropped 0.5 percent. South Korea’s Kospi Index advanced 0.8 percent.

Hong Kong’s Hang Seng Index gained 0.2 percent even as developers dropped after Chief Executive Donald Tsang yesterday said the city’s property market is becoming unaffordable, sparking concern the government will take more steps to curb home prices.

Futures on the Standard & Poor’s 500 Index added 0.1 percent today. In New York, the index advanced 0.2 percent to 1,343.60 yesterday after a government report showing a bigger- than-forecast drop in jobless claims last week bolstered optimism about the economic recovery.

Japan Utilities

A gauge of utility companies was the biggest drag on the MSCI Asia Pacific Index as Japanese electricity producers declined before Tepco, as the owner of the nuclear reactor crippled by the March earthquake is known, reported record losses. After the market close, Tepco posted a full-year net loss of 1.25 trillion yen ($15 billion), the biggest loss by a Japanese company in eight years. President Masataka Shimizu will resign, the company said in a statement today.

Kansai Electric sank 4.9 percent to 1,331 yen, and Chubu Electric Power Co. lost 4.7 percent to 1,222 yen, the lowest levels since 1985. Tepco gained 2.5 percent to 367 yen paring its plunge this week to 19 percent.

“There are too many unclear negative factors,” including the government’s scheme for compensation for the nuclear issues and overhaul of the nation’s energy industry, said Tsutomu Yamada, a market analyst at Kabu.com Securities Co. in Tokyo.

Tepco’s loss eclipsed the 812 billion yen deficit reported by Nippon Telegraph & Telephone Corp. in the year ended March 2002, according to data compiled by Bloomberg. Mizuho Financial Group Inc.’s 2.38 trillion yen loss the following year holds the record.

Best Performers

HTC increased 0.4 percent to NT$1,205 in Taipei. Hyundai Motor, which gets about 13 percent of its sales from North America, advanced 3.2 percent to 241,000 won in Seoul. Brambles added 1.4 percent to A$7.37 in Sydney.

Giant Manufacturing Co., a Taiwanese bicycle maker that receives 39 percent of sales from the Americas, climbed 6.7 percent to NT$105 in Taipei, the best performer on the MSCI Asia Pacific Index. UBS AG raised its rating on the stock to “buy” from “neutral,” saying a recent selloff was “overdone.”

Hana Financial Group Inc., South Korea’s fourth-largest bank, jumped 4.2 percent to 38,300 won in Seoul. The company agreed with Lone Star Funds to extend the May 24 deadline for Hana’s 4.7 trillion won ($4.3 billion) purchase of a controlling stake in Korea Exchange Bank, Chairman Kim Seung Yu said.

Manufacturing growth in the Philadelphia region unexpectedly eased in May to the slowest pace in seven months, a sign the U.S. economy may get less of a boost from the industry that led it out of its last recession. Another report showed sales of existing homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.

‘Investors Are Wary’

“Expectations for the U.S. economic outlook are slightly decreasing and there’s a mood investors are wary of buying stocks,” said Norikazu Kitta, a strategist at Tokyo-based Nikko Cordial Securities Inc. “However, the stable yen and gains in U.S. stocks are positive for the market.”

Among stocks that fell, BHP dropped 1.7 percent to A$44.05. Rio Tinto Ltd. (RIO), the world’s second-largest mining company by sales, slipped 1.1 percent to A$80.20. Aluminum Corp. of China Ltd., the nation’s No. 1 producer of the lightweight metal, lost 0.6 percent to HK$6.91 in Hong Kong. Inpex Corp., Japan’s biggest energy explorer, declined 4 percent to 532,000 yen.

Crude oil for June delivery tumbled 1.7 percent to $98.44 a barrel in New York yesterday. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum declined 1.7 percent yesterday.

In Hong Kong, Hang Lung Properties Ltd. (101) decreased 2.1 percent to HK$32.15, while Sun Hung Kai Properties Ltd. (16), the world’s biggest developer, slid 0.5 percent to HK$120.60. Kerry Properties Ltd., a Hong Kong-based builder controlled by the family of Malaysian billionaire Robert Kuok, decreased 0.8 percent to HK$38.65.

The city’s property market is showing “red lights” for affordability, Tsang said at the Legislative Council yesterday. The government in November increased property transaction taxes and pledged to boost land supply amid public protests that housing prices are becoming unaffordable.

Japanese exporters gained after the yen depreciated. The yen fell to as low as 117.24 against the euro, compared with 116.48 at the close of stock trading in Tokyo yesterday. Against the dollar, Japan’s currency weakened to as low as 82.23 from 81.68. A lower yen boosts the value of overseas income at Japanese companies when converted into their home currency.

Hitachi Ltd., an electronics and power-equipment maker that derives 40 percent of its revenue abroad, advanced 0.4 percent to 462 yen. Toshiba Corp. (6502), the world’s second-largest maker of flash memory chips, increased 0.9 percent to 435 yen. TDK Corp., an electronics manufacturer that derives more than 80 percent of its revenue abroad, climbed 2.3 percent to 4,315 yen.

The MSCI Asia Pacific Index lost 2.2 percent this year through yesterday, compared with gains of 6.8 percent by the S&P 500 and 1.5 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.5 times estimated earnings on average, compared with 13.6 times for the S&P 500 and 11.2 times for the Stoxx 600.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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