Asian Stocks Drop for Second Week on Economy, Europe Debt Crisis Concerns

Asian stocks fell, sending a regional index to its sixth weekly drop in seven weeks, as signs of slowing growth in China and Japan and concern that Europe’s debt crisis is worsening overshadowed improving U.S. data.

HSBC Holdings Plc (5), Europe’s biggest lender, fell 2 percent in Hong Kong. Komatsu Ltd., a maker of construction equipment that gets about 23 percent of sales from China, sank 7.8 percent on a report the mainland’s manufacturing may contract for a second month. Olympus Corp. plunged after restated earnings showed the camera-maker inflated assets by $1.3 billion.

“There’s a potential for further downside in this market,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees about $326 billion of assets globally. “The magnitude of this crisis compared to the one in 2008 is bigger as it includes sovereign risks as well. Policy makers have probably exhausted their fiscal and monetary policy options and they are running out of bullets.”

The MSCI Asia Pacific Index fell 2.3 percent to 112.45 this week after Moody’s Investors Service and Fitch Ratings warned that Europe faces lower credit ratings as it struggles to contain its debt crisis. Italy sold 3 billion euros of five-year notes on Dec. 14 with a yield of 6.47, the most since May 1997.

China’s Manufacturing

The Shanghai Composite Index (SHCOMP) sank 3.9 percent, extending losses for a sixth week. Chinese manufacturing may contract for a second month, according to a survey released Dec. 15 by HSBC and Markit Economics. Hong Kong’s Hang Seng Index declined 1.6 percent.

Japan’s Nikkei 225 Stock Average (NKY) decreased 1.6 percent this week after the Bank of Japan’s Tankan survey showed sentiment among the nation’s largest manufacturers deteriorated more than economists expected. South Korea’s Kospi Index dropped 1.9 percent. Australia’s S&P/ASX 200 slid 1 percent.

The MSCI Asian gauge declined 18.3 percent this year through yesterday, dragging valuations of shares in the gauge to 12.6 times estimated earnings, according to data compiled by Bloomberg.

Power producers led declines this year as Tokyo Electric Power Co., whose Fukushima Dai-Ichi power plant is at the center of the worst nuclear accident in 25 years, plunged 88 percent. Steelmakers have dragged materials companies lower amid slumping demand and as soaring Japanese and Australian currencies made their products less competitive.

Financial stocks (MXAP) dropped this week on speculation a worsening European crisis will hurt banks’ earnings. International Monetary Fund Managing Director Christine Lagarde said this week that Europe’s crisis is “escalating.”

HSBC, StanChart

HSBC dropped 2 percent to HK$58.85 in Hong Kong. Standard Chartered Plc (2888), a London-based bank that gets more than half of revenue in the Asia Pacific, fell 2.9 percent to HK$167.30. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender, decreased 3.8 percent to 329 yen.

Exporters to China declined on concern shipments will fall amid slowing growth in the world’s second-largest economy. Komatsu (6301) sank 7.8 percent to 1,827 yen. Fanuc Corp., a maker of industrial robots, dropped 3.6 percent to 12,230 yen. BHP Billiton Ltd., the world’s biggest mining company that counts China as its biggest market, lost 1.9 percent to A$35.19.

Chinese lenders pared weekly losses on Dec. 16 amid speculation the government will ease lending curbs to prevent the economy from further slowing. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, lost 1.1 percent to HK$4.65 this week, after falling as much as 4 percent. Rival China Construction Bank Corp. fell 1.6 percent to HK$5.45.

Tankan Survey

Japanese machinery makers also dropped after the Bank of Japan’s Tankan survey released on Dec. 15 showed sentiment among the nation’s largest manufacturers deteriorated more than economists expected. Toshiba Corp. (6502), a maker of home appliances and power plants, slipped 4.2 percent to 323 yen. Hitachi Ltd., which makes products ranging from consumer electronics to nuclear reactors, fell 4 percent to 407 yen.

Olympus slumped 17 percent to 1,004 yen, the most on the MSCI Asia Pacific Index, after restating earnings to avoid automatic delisting from the Tokyo Stock Exchange in the wake of an accounting scandal. The earnings reports triggered a downgrade of its debt to one level above junk.

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

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

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