Asian Stocks Drop as Exporters Decline Ahead of European Summit

Asian stocks fell, with a regional benchmark index dropping from a three-month high, ahead of a European summit on the region’s debt crisis and after the U.S. economy expanded less than forecast, hurting the earnings outlook for exporters.

James Hardie Industries SE (JHX), a building materials supplier that counts the U.S. as its biggest market, fell 1.7 percent in Sydney. Mitsubishi Electric Corp. (6503) slumped 15 percent after Japan barred the electronics maker from bidding on state contracts. Country Garden Holdings Co. (2007) led Chinese developers lower in Hong Kong after reports showed home sales in the four biggest cities fell during the week-long Lunar New Year holiday.

The MSCI Asia Pacific Index decreased 1 percent to 121.85 as of 7:32 p.m. in Tokyo, with more than two shares falling for each that rose. The measure has risen the past six weeks, the longest streak since a seven-week stretch that ended Oct. 15, 2010, amid bets China will ease lending curb, the U.S. economy is improving and Europe is containing its debts crisis.

“I don’t expect the rally to be sustainable,” said Pauline Dan, who helps oversee $480 million as chief investment officer at Samsung Asset Management in Hong Kong. “There will still be volatility. I don’t think we’ve seen the worst of the European situation.”

The Nikkei 225 Stock Average slid 0.5 percent, while South Korea’s Kospi Index dropped 1.2 percent. Australia’s S&P/ASX 200 Index slipped 0.4 percent. Hong Kong’s Hang Seng Index declined 1.7 percent.

China’s Shanghai Composite Index (SHCOMP) dropped 1.5 percent as it resumed trading following the week-long Lunar New Year holiday. Taiwan’s Taiex Index, which was also shut last week, jumped 2.4 percent.

‘Looks Overheated’

Futures on the Standard & Poor’s 500 Index slipped 0.7 percent today. The gauge lost 0.2 percent in New York on Jan. 27 after a report showed the U.S. economy grew at a 2.8 percent annualized rate in the three months through December, compared with estimates for a 3 percent rise.

Exporters to the U.S. declined. James Hardie slipped 1.7 percent to A$7.15 in Sydney. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., sank 4.9 percent to HK$17.50. Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, slid 1.7 percent to 2,789 yen in Tokyo.

“The U.S. growth number was below forecast and that’s a negative,” said Toshiyuki Kanayama, a market analyst at Tokyo- based Monex Group Inc., an online brokerage. “The market looks overheated, so investors are likely to use the report as an excuse to sell and lock in profit.”

Bharat Heavy Electricals Ltd. (BHEL), India’s biggest maker of power equipment, sank 11 percent to 244.15 rupees in Mumbai. The company said net income rose 1.9 percent to 14.3 billion rupees ($289 million) in the quarter ended Dec. 31. That compares with the 14.8 billion-rupee average estimate of 30 analysts surveyed by Bloomberg.

Biggest Decline

The MSCI Asia Pacific Index (MXAP) gained 8.1 percent this year through Jan. 27, compared with increases of 4.7 percent by the S&P 500 and 4.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 1.3 times book value. That compares with 2.2 times for the S&P 500 in the U.S. and 1.4 times for the Europe Stoxx 600 Index.

Mitsubishi Electric tumbled 15 percent to 650 yen, the biggest decline on the MSCI Asian gauge. The Japanese government has prohibited the company from joining bids until it returns money from projects on which it charged excessive fees, the company said in a Jan. 27 statement.

The inflated charges include a 33.6 billion yen ($438 million) contract to design guided missiles for the defense ministry in 2010, Takaaki Ohno, a spokesman at the ministry, said by telephone today.

‘Too Optimistic’

Chinese developers and lenders declined in Hong Kong. Home sales in Beijing, Shanghai, Guangzhou and Shenzhen fell 66 percent to 109 units compared with the holiday period a year earlier, according to an e-mailed report today from Centaline Property Agency Ltd., China’s biggest real-estate brokerage. Stocks also declined after the central bank refrained cutting reserve requirements for lenders during the break.

“The weak holiday sales struck investors as they probably were too optimistic that the government may ease curbs anytime soon,” said Danny Bao, a Hong Kong-based property analyst for Daiwa Securities Capital Markets.

Country Garden plunged 11 percent to HK$3.22. China Overseas Land & Investment Ltd., the biggest mainland developer listed in Hong Kong, declined 3.1 percent to HK$14.52. Industrial & Commercial Bank of China (601398) Ltd., the world’s largest lender by market value, dropped 3 percent to HK$5.42.

Companies that get revenue from Europe also declined before European Union leaders gather today for their first summit of 2012 as a deteriorating economy and struggle to complete a Greek debt write-off risk sidetracking efforts to contain the financial crisis.

Cosco Pacific Ltd., which operates a port in Greece, declined 3.4 percent to HK$10.84 in Hong Kong. Hutchison Whampoa Ltd. (13), the retailer, port operator and phone company that counts Europe as its largest market, lost 1.4 percent to HK$72.50. Canon Inc., a camera maker that gets about 32 percent of sales from Europe, slid 1 percent to 3,435 yen in Tokyo.

Mining Accident

Raw material producers fell after crude oil and copper futures declined. The London Metals Exchange Index (LMEX), which tracks prices of six industrial metals including aluminum and copper, lost 0.6 percent on Jan. 27.

Jiangxi Copper Co. (358), China’s biggest producer of the metal, declined 4 percent to HK$19.96. Aluminum Corp. of China Ltd., the nation’s largest supplier of the light metal, dropped 3.4 percent to HK$3.93. Glencore International Plc, the world’s No. 1 commodity trader, fell 2.4 percent to HK$51.

Zijin Mining Group Co., China’s largest gold producer, sank 4.2 percent to HK$3.43 after three workers died in an accident at a copper smelting unit.

Nippon Electric Glass Co. slumped 10 percent to 670 yen after saying profit may fall by at least 54 percent to 31.5 billion yen in the year ending March 31 on slumping demand for glass used in TVs and cameras.

Among stocks that gained, Advantest Corp. (6857), a maker of memory-chip testers, jumped 12 percent to 817 yen after saying it plans to raise its full-year dividend to 15 yen per share from 10 yen a year earlier. The shares also got a boost after JPMorgan Chase & Co. lifted its target price to 700 yen from 650 yen.

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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