Asian Stocks Have Biggest Fall in Three Years on Growth Concern

Asian stocks tumbled the most in almost three years this week, with the regional benchmark index also falling 10 percent from its May peak on concern a global economic recovery is weakening.

Sony Corp. (6758), a Japanese consumer-electronics maker that gets more than a third of its revenue from the U.S. and Europe, sank 6.1 percent in Tokyo even after the Japanese government intervened in the foreign exchange market to stem the yen’s gains. BHP Billiton Ltd. (BHP), the world’s biggest miner, plunged 8 percent, leading commodity stocks lower on concern demand will weaken. Hanjin Shipping Co. tumbled 17 percent in Seoul.

The MSCI Asia Pacific Index tumbled 7.8 percent to 126.08 this week for its biggest weekly loss since October 2008. The gauge this week dropped more than 10 percent from its May 2 high this year, a decline that some investors define as a correction. Shares fell on four out of the five trading days this week, climbing only on Aug. 1 after U.S. President Barack Obama said congressional leaders reached an agreement to raise the nation’s debt ceiling and cut the federal deficit.

“It’s a panic attack from fear that growth is dropping off a cliff,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “There was an expectation that resolution of the U.S. debt- ceiling issue would trigger a relief rally. It looks like everyone forgot about the weakness in the underlying economy.”

Nikkei, Hang Seng

Japan’s Nikkei 225 (NKY) Stock Average sank 5.4 percent for the week even as the yen weakened against the dollar after the government stepped in to sell its currency. South Korea’s Kospi index tumbled 8.9 percent. Hong Kong’s Hang Seng Index slumped 6.7 percent and China’s Shanghai Composite Index dropped 2.8 percent.

Australia’s S&P/ASX 200 Index plunged 7.2 percent as the Reserve Bank of Australia slashed its 2011 economic growth forecast to 2 percent from its previous estimate of 3.25 percent. The gauge has lost more than 17 percent from its April 11 high this year, nearing the 20-percent-level that some investors call a bear market.

The Standard & Poor’s 500 Index tumbled 4.8 percent in New York on Aug. 4, its biggest decline since February 2009. The measure’s slide this week erased its gain for the year, while the Stoxx Europe 600 Index dropped 9.9 percent through the week as concern the global economy is weakening prompted a global rout.

Quantitative Easing

Shares fell even as speculation grew that the U.S. Federal Reserve will start a third round of quantitative easing, or “QE3,” after U.S. data in the past week showed manufacturing grew at the weakest pace in two years, spending unexpectedly fell and service industries grew at the slowest pace since February 2010. The second round of bond purchases ended in June.

“Everyone’s rushing for the exit at one time,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “People are saying they’re not bothered about returns any more, they just want to make sure their money’s safe. There’s really no place to hide at the moment. In this kind of market, the investment case for equities is extremely low.”

Sony slumped 6.1 percent to 1,828 yen in Tokyo. Toyota Motor Corp. (7203), the world’s biggest carmaker, lost 3.7 percent to 3,040 yen. Samsung Electronics Co., the South Korean television maker that reports “America’ as its second-largest market for sales, slid 6.5 percent to 789,000 won in Seoul.

Li & Fung Ltd. (494), the biggest supplier of toys and clothes to retailers including Wal-Mart Stores Inc. and Target Corp., plunged 7.1 percent to HK$12.04 in Hong Kong. In Sydney, Qantas Airways Ltd. (QAN), Australia’s biggest carrier, sank 8.4 percent to A$1.69. National Australia Bank Ltd. (NAB) declined 9.3 percent to A$21.77.

Global Recovery

Concern the global recovery may be derailed drove investors out of stocks this week and into the relative safety of Treasuries, the Swiss franc and yen. Japan’s moves to sell the currency, which this week neared a post-World War II record, and expand an asset-purchase fund followed efforts by the Swiss central bank to curb the franc’s gains.

The European Central Bank resumed bond purchases and offered banks more cash to stem the spread of the debt crisis after the yield on Italian and Spanish bonds surged to records amid speculation Europe will fail to contain its sovereign-debt crisis.

Gauges of raw material producers and energy companies led declines among the 10 industry groups tracked on the MSCI Asia Pacific Index after commodity prices slumped. Crude oil in New York fell 9.2 percent this week, while a measure of primary metals traded in London slid 8.9 percent.

BHP, Rio

BHP dropped 8 percent to A$38.12 in Sydney. Rival Rio Tinto Group, the world’s second-largest mining company by sales, fell 10 percent to A$72. Cnooc Ltd. (883), China’s biggest offshore oil producer, slid 11 percent to HK$15.54 in Hong Kong.

Woodside Petroleum Ltd. (WPL), Australia’s second-biggest oil and gas producer, lost 9.9 percent to A$34.55. In Wellington, New Zealand Oil & Gas Ltd. (NZO), that nation’s biggest publicly traded explorer, retreated 2.9 percent to 66 New Zealand cents.

“The latest weakness in stocks is the product of global investors coming to the conclusion that global growth is no longer getting incrementally better and may even get worse,” said Angus Gluskie, who manages about $350 million at White Funds Management in Sydney. “The moves this week reflect the mental capitulation of investors from hope to pessimism, and each day’s fall is only reinforcing the negative outlook.”

Shipping Companies

Hanjin Shipping, South Korea’s third-biggest shipping line by market value, tumbled 17 percent to 17,550 won. Cosco Pacific Ltd. (1199), a shipping-container terminal operator that is part of China’s largest shipping group, plunged 19 percent to HK$10.22.

Stocks tumbled even as corporate earnings showed signs of improving. Of the 402 companies in the MSCI Asia Pacific Index that reported net income from July 11 through 7:15 p.m. in Hong Kong on Aug. 5, 176 beat analyst estimates, while 132 fell short, according to data compiled by Bloomberg.

The MSCI Asia Pacific Index lost 8.4 percent this year through yesterday, compared with drops of 4.6 percent by the S&P 500 and 13.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 12.7 times estimated earnings on average, compared with 12.0 times for the S&P 500 and 9.8 times for the Stoxx 600. Konami Corp. (9766), a video-game developer, climbed 15 percent to 2,335 yen in Tokyo after saying net income in the quarter ended June 30 more than tripled.

Nippon Paper Group Inc. (3893), Japan’s second-biggest papermaker by revenue, rose 6.6 percent to 1,834 yen. Nomura Holdings Inc. boosted its investment rating to “buy” from “neutral,” saying a restructuring plan and higher paper prices will likely improve earnings in two to three years.

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.

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