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Asia Stocks Set for Two-Day Drop as Metals Slide on China Growth Prospects

Asian stocks fell, with the regional benchmark index set for its steepest two-day decline this year, as declining U.S. factory orders and slower growth in China crimped the earnings outlook for miners and machinery makers.

BHP Billiton Ltd. (BHP), Australia’s top mining company, lost 2.3 percent after metal prices slid. Fanuc Corp. (6954), which makes industrial robots, dropped 2.5 percent in Tokyo. Industrial & Commercial Bank of China Ltd. declined 3.8 percent in Hong Kong after the South China Morning Post said Goldman Sachs Group Inc. may sell a “big chunk” of the lender. AIA Group Ltd. (1299) slumped 8.4 percent in Hong Kong after parent American International Group Inc. said it sold shares in the insurance company.

The MSCI Asia Pacific Index fell 1.2 percent to 125.43 as of 7:25 p.m. in Tokyo with about three stocks falling for each that rose. The measure lost 1 percent yesterday after advancing the past 11 weeks, a record winning streak, amid optimism the U.S. economy is growing and monetary easing in China, Japan and Europe will spur growth.

“The market is digesting its gains over the past few months, and it’s consolidating,” said Khiem Do, the Hong Kong- based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $10 billion. “China is slowing down and the U.S. is growing, but at a modest pace.”

HSI Volume Surges

Hong Kong’s Hang Seng Index dropped 2.2 percent as volume surged to more than double its 30-day intraday average amid a sell-off of AIA shares. The Shanghai Composite Index, which tracks the larger of China’s stock exchanges, fell 1.4 percent as the National People’s Congress meets this week.

Japan’s Nikkei 225 Stock Average lost 0.6 percent. Australia’s S&P/ASX 200 slipped 1.4 percent as the Reserve Bank of Australia kept the benchmark interest rate unchanged at 4.25 percent. South Korea’s Kospi Index fell 0.8 percent.

Futures on the Standard & Poor’s 500 Index (SPXL1) slid 0.8 percent today after the measure fell 0.4 percent in New York yesterday. U.S. reports showed factory orders dropped in January for the first time in three months, offsetting unexpected gains in the services sector.

Machinery Makers

Machinery makers slid, with Fanuc losing 2.5 percent to 14,330 yen. Hitachi Construction Machinery Co. (6305), a Japanese machinery maker, gained 2.8 percent 1,659 yen.

Industrial & Commercial Bank of China slid 3.8 percent to HK$5.26 after the South China Morning Post reported that Goldman Sachs informally contacted “several major institutions” to seek their input on a possible sale of the lender’s shares. China Construction Bank Corp. (939) dropped 3.1 percent to HK$6.23.

Mining companies fell after the London Metal Exchange Index of prices for six industrial commodities including copper and aluminum lost 1.4 percent yesterday, the steepest slide since Feb. 10. BHP Billiton slid 2.3 percent to A$34.58. Minmetals Resources Ltd. (1208) fell 4.6 percent to HK$4.11.

China, the world’s single-largest commodities consumer, yesterday cut its economic growth target to 7.5 percent from an 8 percent goal in place since 2005.

The MSCI Asia Pacific Index gained 11.5 percent this year through yesterday, compared with an 8.5 percent advance by the S&P 500 and an 8.6 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 14.8 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 11.1 times for the Stoxx 600.

AIA Group fell the most on the Asia-Pacific index and was the most active stock after AIG said it sold $6 billion worth of the Hong Kong-based life insurer’s shares to repay a U.S. government bailout. AIA slumped 8.4 percent to HK$26.75.

Geely Automobile Holdings Ltd. (175) dropped 7.4 percent to HK$3.25 in Hong Kong after HSBC Holdings Plc (5) downgraded the carmaker’s investment rating to “underweight” from “neutral.” Geely rose 106 percent this year through yesterday, the biggest winner on the MSCI Asia Pacific Index.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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