Asian Stocks Drop as S&P Puts Euro Nations on Downgrade Watch
Asian stocks fell, with a benchmark gauge headed for its first loss in seven days, after Standard & Poor’s said it may cut credit ratings on Germany, France and 13 other members of the euro amid the worsening debt crisis.
Esprit Holdings Ltd. (330), a clothier that gets most of its revenue from Europe, dropped 11 percent in Hong Kong after its Chief Financial Officer quit. STX Pan Ocean Co., a South Korean shipping line, dropped 4.5 percent after a leak was found in a vessel. Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, slid 2.1 percent in Tokyo. Meiji Holdings Co. plunged 9.7 percent after a report that radioactive cesium was found in some of the Japanese milk maker’s products.
“People want to move away from risk assets,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $20 billion. “The market is unstable and has been moving up and down like a seesaw. Investors buy stocks (MXAPJ) on good news after a plunge and are selling unless the news moves in the right direction. The downgrade news is a bad story in the middle of such movements.”
The MSCI Asia Pacific Index fell 1.3 percent to 116.70 as of 8:25 p.m. in Tokyo, set to end its longest winning streak since Oct. 13. All 10 industry groups on the measure declined, with more than six stocks retreating for each that gained.
Australia’s S&P/ASX 200 index retreated 1.4 percent. The nation’s central bank lowered its benchmark interest rate today for a second straight month as Europe’s fiscal crisis threatens to slow the nation’s commodity exports.
The MSCI Asia Pacific Index sank 14 percent this year through yesterday, compared with less than 0.1 percent drop by the S&P 500 and a 12 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.9 times estimated earnings on average, compared with 12.7 times for the S&P 500 and 10.6 times for the Stoxx 600.
Futures on the Standard & Poor’s 500 Index (SPXL1) climbed 0.4 percent today after falling as much as 0.8 percent following S&P’s announcement that it may strip France and Germany of their AAA credit ratings. The euro area’s six AAA rated countries are among the nations to be placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of European Union leaders on Dec. 9, S&P said.
The placements are “prompted by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole,” S&P said in its statement.
Esprit sank 11 percent to HK$10.72 in Hong Kong after saying its Chief Financial Officer Chew Fook Aun quit for personal reasons, effective on or before June 1, because he is “unable to spend the required time in Europe.” Barclays Capital Inc. analyst Vineet Sharma said the resignation at this critical juncture doesn’t look good, no matter what reasons are behind it.
Hutchison Whampoa Ltd. (13), an owner of ports in Germany, Italy and Spain, slid 1.4 percent to HK$67.55 in Hong Kong. Toyota Motor Corp., the world’s biggest carmaker by market value, fell 2.1 percent to 2,606 yen in Tokyo, the second-biggest drag on the MSCI Asia Pacific Index after Samsung Electronics Co.
In the U.S., service industries expanded in November at the slowest pace since January 2010 as employment cooled, a sign improvement in the biggest part of the economy will be uneven. The Institute for Supply Management’s non-manufacturing index unexpectedly fell to 52 last month from October, the Arizona based-group said.
Asian economies are facing “much greater downside risks” now because of the possibility of a recession in the U.S. and Europe and the threat of destabilizing capital flows, the Asian Development Bank said.
STX Pan Ocean declined 4.5 percent to 5,980 won in Seoul after saying a fault was found in a $110 million commodity ship it received from its affiliate, which was leased to iron-ore miner Vale SA.
Citigroup Inc. cut its estimates for iron ore prices in the fourth quarter and 2012 by 7 percent to $148 a metric ton amid a deteriorating macroeconomic environment and slowing steel production growth in China.
BHP Billiton Ltd. (BHP), the largest global mining company, retreated 1.5 percent to A$36.71, while Rio Tinto Group, the world’s third-biggest mining company by sales, sank 2.2 percent to A$65.55 in Sydney.
Newcrest Mining Ltd. (NCM), an Australian gold producer, declined 4 percent to A$33.99 in Sydney after Deutsche Bank AG cut its rating to “hold” from “buy.” Tosoh Corp., a chemical products maker, slid 4.8 percent to 219 yen in Tokyo after Mizuho Securities Co. cut its rating on the stock to “neutral” from “buy.”
Meiji plunged 9.7 percent to 3,020 yen, the biggest drop in the MSCI Asia Pacific Index, after Kyodo News reported that radioactive cesium was found in milk powder made by the company. Meiji confirmed the report and said the contamination poses no health risk.
Radiant Opto-Electronics Corp., a maker of liquid crystal display backlight units, tumbled 7 percent to NT$86.80 in Taipei after its unconsolidated sales in November fell 19 percent from a year earlier.
Among stocks that rose, Olympus Corp., a scandal-hit Japanese camera maker, gained 9.1 percent to 1,190 yen in Tokyo before a press briefing that was made today by an independent committee investigating the company’s efforts to hide losses.
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