Asia Stocks Fall on Japanese Earnings, Exports Outlook

Asia’s benchmark stock index fell, paring yesterday’s advance, as Japanese companies forecast lower-than-estimated earnings and as the outlook for exporters dimmed after a report signaled U.S. manufacturing is slowing.

Tokyo Electron Ltd., which sells industrial electronics products, sank 8.3 percent after its earnings estimate trailed analysts’ projections. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, lost 3.9 percent as the yen gained against the dollar to the highest level since February. Commonwealth Bank of Australia rose 1.7 percent as the nation’s central bank cut interest rates to spur growth.

The MSCI Asia Pacific Index lost 0.7 percent to 124.49 as of 3:14 p.m. in Tokyo with more than two stocks falling for each that rose. Japan and Australia were the only major markets traded today in Asia, with markets closed in Hong Kong, China, India and South Korea.

“Investors can’t get optimistic about the Japanese economy,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, a unit of Japan’s fifth-biggest lender by market value. “The number of companies where earnings are improving as much as investors’ expectations is relatively small.”

The Asia-Pacific index fell 2.8 percent in March and April amid concern Europe will be trapped in a recession with debt- stricken nations such as Spain cut spending, and as Chinese economic growth slows.

Yen, BOJ

Japan’s Nikkei 225 Stock Average fell 1.8 percent after the yen touched 79.68 per dollar today, matching the strongest level since Feb. 22, showing that the Bank of Japan’s additional stimulus on April 27 isn’t weakening the currency. A stronger yen cuts the value of overseas earnings at Japanese exporters. Japan’s markets will be closed on May 3 and 4 for public holidays.

Australia’s S&P/ASX 200 rose 0.8 percent after the Reserve Bank of Australia today cut its benchmark interest rate by a half percentage point to a two-year-low 3.75 percent.

Financial shares contributed the most to the gauge’s advance. Commonwealth Bank of Australia added 1.7 percent to A$52.85. Westpac Banking Corp. (WBC), Australia’s No. 2 lender by market value, advanced 0.4 percent to A$22.83. The MSCI Asia Pacific Excluding Japan Index was little changed.

“Aussie equities have been lagging for a while on the tight monetary policy, so it needed to be loosened,”said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages almost $100 billion. “Given the weakness that we’ve seen across the board in manufacturing and retail, a quarter-point cut wasn’t going to be enough. They have done the right thing.”

Japanese Profits

Tokyo Electron, the world’s second-biggest maker of semiconductor production equipment, fell 8.3 percent to 4,085 yen, the lowest level since February 8, after predicting profit will drop 18 percent this fiscal year.

Yamada Denki Co., an operator of consumer electronics stores, slumped 10 percent to 4,665 yen after reporting an operating profit of 88.9 billion yen ($1.1 billion), missing analyst estimates of 112 billion yen.

Sharp Corp., Japan’s largest maker of liquid-crystal displays, dropped 9.3 percent to 468 yen after forecasting a wider-than-expected full-year net loss.

Of 375 companies listed on the MSCI Asia Pacific Index (MXAP) that have reported earnings since April 10, about 42 percent missed analysts estimates and 45 percent beat them.

Manufacturing Slows

Futures on the Standard & Poor’s 500 Index rose 0.1 percent today. The index slid 0.4 percent in New York yesterday, when the Institute for Supply Management-Chicago Inc. said its business activity barometer dropped to 56.2 in April, showing manufacturing is cooling. Readings greater than 50 signal growth.

Companies that do business in the U.S. fell. Sony dropped 3.9 percent to 1,265 yen. Honda Motor Co. (7267), Japan’s second- largest carmaker by market value that generates 44 percent of its sales in North America, declined 3.4 percent to 2,799 yen.

“As expectations ratchet up and data can’t support those high expectations, we start to get pessimistic again,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. “Having seen a big rally in stocks in the March quarter, we are back to more neutral positioning. Valuation support isn’t there as strongly as before.”

Spain in Recession

Stocks also fell after a government report yesterday showed Spain’s economy shrank 0.3 percent in the first quarter, matching the contraction in the previous three months.

Asian stocks held on to losses even after Chinese government report today showed the Purchasing Managers’ Index rose to 53.3 in April from 53.1 in March.

The MSCI Asia Pacific Index rose 10.1 percent this year through yesterday, compared with an 11.2 percent gain by the S&P 500 and a 5.2 percent advance by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.8 times estimated earnings on average, compared with a multiple of 13.3 for the S&P 500 and 10.8 times for the Stoxx 600.

The Nikkei 225 Volatility Index (VNKY) rose 1.4 percent to 20.81, indicating traders expect a swing of about 6 percent on the benchmark gauge over the next 30 days. Trading volume on the Nikkei 225 was 6.5 percent below its 30-day average, according to data compiled by Bloomberg.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.