Most Asia Stocks Retreat Amid Surging Spanish Bad Loans

Most Asian stocks fell, with the regional benchmark index retreating after yesterday rising the most in three weeks, as bad loans held by Spanish banks surged ahead of European bond sales today, damping investor confidence.

Esprit Holdings Ltd. (330), a clothier that depends on Europe for about 80 percent of its sales, declined 1.2 percent in Hong Kong. Nippon Sheet Glass Co. (5202) headed for its lowest close since 1976 in Tokyo after Chief Executive Officer Craig Naylor quit over a disagreement with the Japanese company’s board. OCI Co. fell 2.4 percent in Seoul after operating profit at the chemical maker declined. Kasikornbank Pcl rose 4.6 percent in Bangkok after the lender’s first-quarter net income surged 47 percent.

The MSCI Asia Pacific Index declined 0.1 percent to 124.83 as of 6:46 p.m. in Tokyo, with about five stocks falling for every four that rose. Spain’s non-performing loans as a proportion of total lending jumped to the highest level since 1994 ahead of Spanish and French debt auctions today.

“Investors are becoming more concerned about Europe’s situation,” although not to the degree where people worried about a sudden default of financial institutions like last year, said Shintaro Takeuchi, a Tokyo-based portfolio manager at Tokio Marine & Nichido Fire Insurance Co., which oversees about $106 billion. “It will still take a while for Europe’s debt crisis to be fully resolved. It’s better to invest in assets with higher yields than risky assets like stocks.”

The Asia-Pacific gauge, which includes companies from some emerging markets, rose 9.8 percent this year through yesterday as central banks including Japan and China moved toward additional easing and the U.S. economy showed signs of recovery.

Japan’s Nikkei 225 Stock Average fell 0.8 percent even as exports grew at the fastest pace in a year in March. South Korea’s Kospi index sank 0.2 percent. Australia’s S&P/ASX 200 Index increased 0.3 percent.

Hang Seng Gains

Hong Kong’s equity benchmark rose 1 percent as Chinese lenders gained after a report reserve ratios for mainland banks may be cut to stimulate the economy, according to Xinhua News Agency, which cited an unidentified People’s Bank of China official. The Shanghai Composite Index slid 0.2 percent.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.6 percent today. The gauge dropped 0.4 percent in New York yesterday as Intel Corp. and International Business Machines Corp. reported that sales grew at the slowest pace since 2009.

Esprit slid 1.2 percent to HK$16.58 in Hong Kong. Nikon Corp. (7731), a camera maker that gets more than a fifth of its sales from Europe, dropped 2 percent to 2,343 yen in Tokyo.

Stocks on the MSCI Asia Pacific Index are valued at 12.7 times estimated earnings on average, compared with 13.2 times for the S&P 500 and 10.7 times for the Stoxx Europe 600 Index.

Nippon Sheet Glass

Nippon Sheet Glass slumped 6.9 percent to 108 yen, the steepest drop in the MSCI Asia Pacific Index. (MXAP) Chief Executive Officer Craig Naylor quit yesterday because of a clash with the board, the company said yesterday. The departure leaves only three non-Japanese CEOs leading Nikkei 225 companies.

OCI dropped 2.4 percent to 219,500 won in Seoul after saying in a regulatory filing that its first-quarter operating profit dropped 75 percent.

Kasikornbank rose 4.6 percent to 158 baht in Bangkok, the best performer on Thailand’s SET100 Index, after net income in the three months ended March rose 47 percent to 8.99 billion baht ($291 million). The company said gains in lending and interest income drove profit growth amid a recovery from last year’s floods.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

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

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