Most Asia Stocks Fall as Yen Drags Japan Before H.K. Open

Asian stocks rose for a third day as signs of strength in the world’s two biggest economies, the U.S. and China, bolstered confidence in the global recovery. Japanese shares fell as the yen’s appreciation damped the earnings outlook for the country’s exporters.

Samsung Electronics Co. (005930), South Korea’s biggest exporter of consumer electronics, rose 2.8 percent in Seoul after the Institute for Supply Management’s U.S. factory index rose more than forecast. Tencent Holdings Ltd., China’s biggest Internet company, advanced 2.9 percent after a gauge of activity at mainland service companies rose to a six-month high. Electronics maker Kyocera Corp. and other Japanese exporters fell after the yen rose to a three-week high against the dollar.

The MSCI Asia Pacific Index added 0.2 percent to 127.46 as of 7:52 p.m. in Tokyo, with about the same number of stocks rising as falling. The measure gained 0.4 percent yesterday, extending its best quarterly rally since the period ending Sept. 30, 2010.

“Judging from the comments of business people in the ISM report, the earnings outlook for U.S. companies may improve on the back of strong domestic demand,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co. “While the Chinese market is closed, people are waiting for the Fed minutes and jobs data to gauge the possibility of additional monetary easing.”

U.S., China

Asia’s benchmark equity gauge has risen 12 percent this year amid optimism the U.S. economy will weather Europe’s debt crisis and monetary easing in Japan, China and Europe will spur growth. Gains slowed after China last month cut its target for economic growth as it seeks to cool the property market and become less dependent on exports.

Korea’s Kospi Index gained 1 percent. Hyundai Motor Co. gained 6.3 percent to 255,000 won after reporting sales increased 18 percent last month. Affiliate Kia Motors Corp. climbed 3.4 percent to 78,300 won.

Australia’s S&P/ASX 200 Index (AS51) added 0.2 percent as the nation’s central bank kept the benchmark interest rate unchanged. Japan’s Nikkei 225 Stock Average dropped 0.6 percent. The MSCI Asia Pacific excluding Japan Index gained 0.8 percent.

Hong Kong’s Hang Seng Index (HSI) rose 1.3 percent before a public holiday tomorrow in the city. Trading volume in Hong Kong was 13 percent below the 30-day average as markets in China were closed for a holiday and before U.S. economic reports this week.

Volatility Falls

A gauge of volatility on the Hang Seng gauge fell 6.3 percent to 18.53, the lowest since July 22, indicating traders expect a swing of 5.3 percent on the benchmark gauge over the next 30 days. Volatility measures for Korea’s Kospi 200 Volatility Index (VKOSPI) and Japan’s Nikkei 225 also fell.

Futures on the Standard & Poor’s 500 Index (SPXL1) fell 0.2 percent today. The index gained 0.8 percent in New York yesterday after the ISM’s survey of factory managers showed business conditions improved, with the index rising to 53.4 in March from 52.4 a month earlier. Fifty is the dividing line between growth and contraction.

Stocks also rose after China’s government said an index of purchasing managers at service companies rose to 58.0 in March from 48.4 in February. People’s Bank of China Governor Zhou Xiaochuan said today China’s goal is to gradually reduce inflation and that the country is using interest rates and other measures to achieve a soft landing.

Samsung Electronics, which counts China and the U.S. as its biggest markets, rose 2.8 percent to 1.335 million won. Tencent advanced 2.9 percent to HK$222.80, and Air China Ltd. advanced 1.9 percent to HK$5.35 in Hong Kong.

Book Value

Stocks in the Asian benchmark are valued at 1.4 times book value, compared with 2.3 times for the S&P 500 and 1.5 times for the Stoxx 600, according to Bloomberg data. A number below 1 means companies can be bought for less than value of their assets.

Japanese shares fell after the yen touched 81.56 per dollar, the strongest since March 9. The dollar was buying 83.05 yen at the April 2 close of trading in Tokyo. A stronger yen cuts the value of overseas earnings when repatriated. The currency weakened after the Bank of Japan in February set an inflation goal of 1 percent and decided to buy more government bonds.

The rising yen “drags down shares as it has the greatest impact on manufacturers’ earnings,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of $22 billion. “Investors are beginning to doubt the BOJ will continue to ease monetary policy.”

Kyocera slid 1.1 percent to 7,540 yen. Toyota Motor Corp. (7203), Asia’s biggest carmaker, lost 0.3 percent to 3,555 yen. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, dropped 0.6 percent to 1,707 yen.

Sun Hung Kai

PT Bank Danamon Indonesia surged 39 percent to 6,400 rupiah in Jakarta after DBS Group Holdings offered to buy the lender for about $7.2 billion. DBS, Southeast Asia’s biggest bank, dropped 2.8 percent to S$13.79.

Sun Hung Kai Properties Ltd. (16), the world’s No. 2 real estate company by market value, rose 2 percent to HK$96.25 in Hong Kong after the company announced its co-chairmen Raymond and Thomas Kwok would hold a press conference today. The billionaire brothers were arrested last week by the city’s anti-corruption agency.

The developer is operating as usual, Thomas Kwok said at a brief press conference after the Hong Kong close. Raymond Kwok denied any wrongdoing at the same event.

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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