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Asian Stocks Fall as Europe Debt Crisis, U.S. Economy Spur Profit Concerns

Asian stocks fell, with the region’s benchmark index sinking for the third day in four, as lower profit forecasts fueled concern that a slowing global economic recovery will crimp earnings.

Tokyo Electron Ltd., Japan’s biggest manufacturer of chip- making equipment, declined 2.1 percent in Tokyo, leading chipmakers lower after Applied Materials Inc., the world’s largest producer of chipmaking equipment, forecast third-quarter profit and sales that missed analyst estimates. Austal Ltd. (ASB), an Australian shipbuilder, plunged 9.7 percent in Sydney after lowering its full-year earnings forecast. Toyota Motor Corp. (7203) led Japanese carmakers higher after a report predicted auto production will recover from the country’s March earthquake.

The MSCI Asia Pacific Index fell 0.6 percent to 130.99 as of 6:38 p.m. in Tokyo, reversing an earlier gain of as much as 0.4 percent. More than two stocks fell for each that gained on the gauge, which last week slid for a third straight week as Greece’s debt crisis intensified, Japan’s economy contracted, and disappointing U.S. economic data fueled concern about the global recovery.

“Issues like the softening growth rate of business activity and Europe’s debt problems have prompted investors to look for reasons to sell,” said Angus Gluskie, who manages about $350 million at White Funds Management Pty. in Sydney. “Long-term investors are sitting on the sidelines and short- term traders are selling into the market. It’s opening up some good value in many stocks, and I suspect we’ll see buying start to emerge.”

Regional Benchmarks

Australia’s S&P/ASX 200 Index fell 1 percent, pulled down by Australian lenders after Goldman Sachs & Partners Australia Pty cut ratings on Commonwealth Bank of Australia (CBA), the nation’s biggest by market value, and Australia & New Zealand Banking Group Ltd.

Japan’s Nikkei 225 (NKY) Stock Average declined 0.6 percent and South Korea’s Kospi Index slid 1.3 percent. China’s Shanghai Composite index retreated 0.9 percent.

The Hang Seng Index climbed 0.1 percent in Hong Kong, where Glencore International Plc, the world’s biggest listed trader of commodities by capitalization, fell 2.9 percent in its trading debut. The Hang Seng pared declines after David Riley, Fitch Ratings Ltd.’s group managing director of sovereign ratings, told Boersen-Zeitung that it has no plans to lower Italy’s credit rating or the outlook for the country.

Futures on the Standard & Poor’s 500 Index declined 0.1 percent today. In New York, the index fell 0.1 percent to 1,316.28 yesterday as a drop in stocks most-tied to economic growth offset a government report showing that sales of new homes rose to the highest level this year.

A report last week showed U.S. industrial output stalled in April. Output was unchanged after a 0.7 percent gain in March, figures from the Federal Reserve showed. This week, a Chinese manufacturing gauge fell to its lowest level in 10 months. China’s preliminary manufacturing index, known as the Flash PMI, was at 51.1 in May, compared with the final reading of 51.8 in April, HSBC Holdings Plc and Markit Economics said on May 23.

Chipmakers Decline

Financial and technology shares were the biggest drag today among the 10 industry groups tracked by the MSCI Asia Pacific Index.

Tokyo Electron declined 2.1 percent to 4,410 yen. Elpida Memory Inc., the world’s third-largest maker of computer memory, slumped 3.8 percent to 1,048 yen. Dainippon Screen Manufacturing Co., a chip equipment maker, dropped 2.8 percent to 654 yen in Tokyo. Samsung Electronics Co. fell 1 percent to 856,000 won in Seoul.

Santa Clara, California-based Applied Materials yesterday said profit excluding certain costs in the current period will be 31 cents to 37 cents a share, and sales will drop 3 percent to 10 percent from the prior quarter. Analysts in a Bloomberg survey on average projected profit of 38 cents and revenue of $2.83 billion.

Customers are still assessing whether disruptions to the supply of electronic parts created by the March earthquake and tsunami in Japan will curb demand for semiconductors. That’s leading chipmakers to hold off on or cancel equipment orders, said Patrick Ho, an analyst for Stifel Nicolaus & Co.

Real Economy

“The real economy is starting to slow down and that’s going to weigh down on corporate earnings,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversaw $325 billion as of March 31.

Austal plunged 9.7 percent to A$2.61 in Sydney after lowering its full-year profit forecast, citing the “unprecedented strength” of the Australian dollar alongside “softness” in Europe’s ferry market.

The MSCI Asia Pacific Index saw its first negative earnings growth this quarter since six quarters ago, according to data compiled by Bloomberg. Companies such as Nintendo Co. and Nidec Corp. reported earnings that missed estimates while Sony Corp. said it expects fallout from the March 11 temblor in Japan to dent operating profit this fiscal year.

Glencore Debut

The MSCI Asia Pacific Index lost 4.3 percent this year through yesterday, compared with a gain of 4.7 percent by the S&P 500 and a drop of 0.2 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.3 times estimated earnings on average, compared with 13.3 times for the S&P 500 and 11 times for the Stoxx 600.

Glencore dropped 2.5 percent to HK$64.90 in Hong Kong in the world’s biggest initial public offering this year. Glencore, based in Baar, Switzerland, began trading in London last week. The decline in share prices today reflects declines in commodity prices, Chief Executive Officer Ivan Glasenberg said.

In Sydney, Commonwealth Bank fell 1.8 percent to A$50.01 and ANZ lost 0.5 percent to A$21.70 after having their ratings cut to “hold” from “buy” by analysts at Goldman Sachs, which cited slower loan growth.

Automakers were among stocks that advanced today, leading a gauge of consumer discretionary stocks higher on the MSCI Asia Pacific Index.

Auto Production

Toyota rose 2.2 percent to 3,315 yen, even as it denied media reports in Japan that its auto production will recover to 90 percent in June, and repeated that output will be restored to 70 percent next month.

Japanese public broadcaster NHK and the Kyodo news agency reported that Toyota would restore 90 percent of production in Japan in June. The Toyota-city based automaker is running at about 50 percent of normal production levels after the March 11 earthquake disrupted output.

Honda Motor Co. gained 1.3 percent to 3,065 yen. Nissan Motor Co. rose 1.3 percent to 791 yen. Deutsche Bank AG raised its profit estimates for both Honda and Nissan, citing higher car sales.

David Riley of Fitch told Boersen-Zeitung, a German newspaper, that the agency doesn’t expect Italy to pose a significant risk for the rest of the euro region as long as Prime Minister Silvio Berlusconi’s government adheres to its 2011 deficit-reduction plans, which have been on target so far.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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

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