Asian Stocks Fall on Concerns for China, U.S. Economies

Asian stocks fell after China raised fuel prices, sparking concern growth in the world’s fastest-growing major economy may slow, and a Federal Reserve official said the U.S. rebound still faces risks.

Gome Electrical Appliances Holding Ltd., China’s second- biggest electronics retailer, dropped 5.4 percent. Sun Hung Kai Properties Ltd. (16) fell 2.4 percent after a director of the world’s No. 1 developer was arrested as part of a bribery investigation. Transurban Group (TCL), an Australian operator of toll roads, dropped 2.6 percent after its largest shareholder sold a 7.9 percent stake at a discount.

The MSCI Asia Pacific excluding Japan Index slipped 1 percent to 440.9 as of 6:50 p.m. in Hong Kong. The gauge climbed 12 percent this year as positive economic reports from the U.S. boosted confidence in the outlook for the region’s exporters. China’s Premier Wen Jiabao earlier this month announced the country had reduced its target for economic growth to 7.5 percent this year.

“Higher energy costs and falling profits may worry investors that the economy is slowing even further,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. in Shanghai.

Optimism in the U.S. recovery may wane after Federal Reserve Bank of New York President William Dudley said yesterday signs that the U.S. economy is improving don’t dispel risks to growth. “It is far too soon to conclude that we are out of the woods,” Dudley said in a speech.

South Korea’s Kospi Index lost 0.2 percent, while Australia’s S&P/ASX 200 Index slipped 0.4 percent. Hong Kong’s Hang Seng Index (HSI) dropped 1.1 percent, and China’s Shanghai Composite Index declined 1.4 percent. Japanese markets are closed for a public holiday.

Biggest Drop

China, the world’s largest oil consumer after the U.S., increased gasoline and diesel prices for the second time in less than six weeks after crude gained last month the most in a year. Refiners will charge 7 percent more for gasoline and 7.8 percent more for diesel, the biggest price increases in more than two years, according to data compiled by Bloomberg.

China Cosco Holdings Co., the world’s biggest operator of dry-bulk ships, fell 5.6 percent to HK$4.57, the most on the Hang Seng China Enterprises Index. China Shipping Container Lines Co. (2866), the nation’s second-biggest box-cargo carrier, dropped 1.2 percent HK$2.50. Morgan Stanley yesterday cut the transportation industry to “underweight” due to rising oil prices.

Chinese retailers also declined. Gome Electrical decreased 5.4 percent to HK$2.10. Belle International Holdings Ltd. (1880), China’s biggest shoe retailer, slid 0.7 percent to HK$13.54.

Futures on the Standard & Poor’s 500 Index lost 0.6 percent today. The gauge gained 0.4 percent yesterday in New York to its highest level since May 2008 after Apple Inc. announced plans to pay a dividend and buy back $10 billion of its stock.

Corruption Investigation

Sun Hung Kai dropped 2.4 percent to HK$113. Thomas Chan Kui-Yuen, an executive director responsible for land acquisitions and project planning at the company, was arrested by the Independent Commission Against Corruption as part of an investigation into an alleged bribery.

“We believe this event will not affect the daily operations of the company,” John Chan, an analyst at Standard Chartered Plc, wrote in a report today. “While the news will likely be negative for stock sentiment, we don’t see much concern unless the allegations were to extend to the company and other senior management.”

Commodity producers fell as BHP Billiton Ltd. (BHP), the world’s biggest mining company, said China’s steel production is slowing and as copper prices declined amid concern that high inventories in Shanghai won’t be absorbed any time soon.

BHP reversed an early gain, falling 0.1 percent to A$35.31 in Sydney. Rio Tinto Group retreated 0.4 percent to A$65.61 as its manager of iron-ore expansion David Joyce said China’s near- term growth is slowing. Jiangxi Copper Co. (358), China’s biggest producer of the metal, slipped 2.4 percent to HK$18.24.

‘Not Spectacular’

Transurban Group declined 2.6 percent to A$5.54 in Sydney, the most in three months. CP2 Ltd., the company’s biggest shareholder, sold 114.6 million shares at A$5.51 each, a 3.2 percent discount to yesterday’s closing price, in a transaction underwritten by UBS AG, according a term sheet obtained by Bloomberg News.

The rally in equities has boosted the value of stocks on the MSCI Asia Pacific Excluding Japan Index to 12 times estimated earnings on average, compared with 13.5 times for the S&P 500 and 11.4 times for the Stoxx 600.

“The market is going through a period of consolidation following recent gains,” said Pauline Dan, who helps oversee $480 million as chief investment officer at Samsung Asset Management in Hong Kong. “We’re not seeing spectacular recovery in the U.S., Europe or China. Earnings growth won’t be very exciting.”

China Telecom Corp., the country’s biggest fixed-line carrier, dropped 3.1 percent to HK$4.36 in Hong Kong after posting fourth-quarter profit that missed analysts’ estimates because of costs to add mobile subscribers.

Of the 279 companies on the MSCI Asia Pacific Excluding Japan Index that reported annual earnings since Jan. 9, 59 percent have missed analysts’ estimates, data compiled by Bloomberg showed.

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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