Asian Stocks Fall Amid Earnings, China Slowdown Concerns

Photographer: Kiyoshi Ota/Bloomberg

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Photographer: Kiyoshi Ota/Bloomberg

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Asian stocks fell, with the regional benchmark index heading for a third straight decline, after companies from Daewoo Engineering & Construction Co. to Tokyo Steel Manufacturing Co. posted weaker earnings and a report China’s manufacturing may shrink for a sixth month.

Daewoo Engineering dropped 4.4 percent in Seoul after the construction company posted a 38 percent drop in first-quarter operating profit. Tokyo Steel slumped 7.6 percent as the steelmaker’s full-year loss widened. China Mobile Ltd. (941), the world’s biggest carrier by subscribers, fell 3 percent in Hong Kong after posting first-quarter net income that missed analysts’ estimates.

“Investors are taking a wait-and-see attitude as some earnings disappoint,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management Asia Ltd., which oversees about $165 billion. “Even if more earnings were to come in at below expectations, we are still staring at very cheap equity valuations. There’s still scope for the market to move up.”

The MSCI Asia Pacific Index dropped 0.5 percent to 123.61 as of 5:08 p.m. in Tokyo, erasing gains of as much as 0.3 percent. More than two shares fell for each that rose in the measure. The gauge posted its fourth weekly retreat this year last week as the Group of 20 nations warned Europe’s debt crisis still threatens global growth and as reports showed economic expansion is slowing in the U.S. and China.

China Manufacturing

Japan’s Nikkei 225 Stock Average (NKY) dropped 0.2 percent, erasing gains of as much as 0.9 percent. South Korea’s Kospi Index lost 0.1 percent and Australia’s S&P/ASX 200 Index declined 0.3 percent. Hong Kong’s Hang Seng Index sank 1.8 percent.

China’s Shanghai Composite Index slid 0.8 percent as a survey showed the nation’s manufacturing may contract for a sixth month in April. The 49.1 preliminary reading of the Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics today compares with a final figure of 48.3 in March. A number below 50 points to a contraction.

The MSCI Asia Pacific Index (MXAP) gained 9.1 percent this year through last week, compared with a 9.6 percent advance by the S&P 500 and a 5.4 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 12.7 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 10.8 times for the Stoxx 600.

Of the 50 companies on the regional benchmark index that reported quarterly net income since April 10, 31 exceeded analysts’ estimates, while 15 missed expectations, according to data compiled by Bloomberg News.

Earnings Performance

Daewoo Engineering dropped 4.4 percent 9,800 won in Seoul. Operating profit fell to 51.2 billion won ($45 million) in the three months that ended March 31 from 82.3 billion won a year earlier, Daewoo said on April 20.

Tokyo Steel (5423) sank 7.6 percent to 642 yen after saying losses widened to 14.3 billion yen ($176 million) in the year ended March 31 from 10.4 billion yen 12 months earlier on higher production costs.

Nippon Yusen K.K., Japan’s largest shipping line by sales, slid 1.7 percent to 237 yen after reporting a preliminary full- year loss of 73 billion yen, wider than its forecast of a 26 billion yen loss, due to a slowdown in its logistics business and the reversal of deferred taxes assets.

China Mobile slid 3 percent to HK$84.80 in Hong Kong after reporting first-quarter profit rose 3.5 percent from a year earlier to 27.8 billion yuan ($4.4 billion). That compared with the 28.2 billion yuan median estimate of four analysts surveyed by Bloomberg News.

U.S. Futures

Futures on the Standard & Poor’s 500 Index declined 1 percent today. The index gained 0.1 percent in New York on April 20 as profits from companies including Microsoft Corp. and General Electric Co. beat estimates and a report showed German business confidence improved.

Asian stocks initially advanced today after the International Monetary Fund received more than $430 billion in pledges at the G-20 meeting in Washington over the weekend, nearly-doubling the IMF’s firepower in addressing Europe’s debt crisis. The group said in a statement that downside risks remain in the world economy and that volatility is high in part because of pressures in Europe.

Among stocks that advanced, Yakult Honsha Co. jumped 12 percent to 3,075 yen, its highest close since October 2008, after the Nikkei newspaper reported Danone may increase its stake in Japan’s largest non-alcoholic beverages maker. Paris- based Danone owns about 20 percent of Yakult, according to data compiled by Bloomberg.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net

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