Asian Stocks Fall on China Manufacturing, U.S. Growth Cut

Asian stocks outside Japan fell, with the regional benchmark index retreating from a one-month high, as a survey showed China’s manufacturing may shrink for an eighth month and after the Federal Reserve cut its U.S. growth estimate and extended its Operation Twist.

Samsung Electronics Co. (005930), a mobile-phone maker that counts China and the U.S. as its top markets, dropped 2 percent in Seoul. BHP Billiton Ltd., the world’s largest mining company and Australia’s No. 1 oil producer, declined 1.2 percent in Sydney as crude and copper futures fell. Renesas Electronics Corp. gained 3.1 percent in Tokyo on a report that KKR & Co. and Silver Lake are in talks to invest in the chipmaker.

The MSCI Asia Pacific Index slipped 0.7 percent to 115.88 as of 6:57 p.m. in Tokyo, with almost three shares falling for every two that rose. A measure that excludes Japanese equities dropped 1.5 percent. More than $5 trillion has been erased from global equities since March amid slowing economic growth in the U.S. and China, and a spreading European debt crisis that pushed Spain’s borrowing costs to a record.

“The Fed extending Operation Twist reflects their concern economic growth in the U.S. is slowing,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “Even though markets are cheap, we’re not back to a risk-on mode. Risks in Europe are not over by a long way. Rising bond yields in Spain and Italy make it very challenging for policy makers in Europe.”

China Manufacturing

China’s Shanghai Composite Index dropped 1.4 percent. The nation’s manufacturing may shrink for an eighth month in June, matching the streak during the global financial crisis in a signal the government’s stimulus measures have yet to reverse the economy’s slowdown, a survey by HSBC Holdings Plc and Markit Economics showed.

Hong Kong’s Hang Seng Index sank 1.3 and South Korea’s Kospi slipped 0.8 percent. Australia’s S&P/ASX 200 Index (AS51) slid 1.1 percent.

The Fed decided to expand its so-called Operation Twist program at the end of a two-day meeting yesterday, replacing short-term bonds with longer-term debt by $267 billion through the end of 2012, and pledged to make “broader financial conditions more accommodative.”

Japan’s Nikkei 225 Stock Average (NKY) advanced 0.8 percent, bucking declines across the region, as the Fed’s decision to lengthen the maturity of its assets, as opposed to buying more, was seen curtailing the yen’s advance, boosting the outlook for exporters’ earnings. Stocks also gained as the country’s upper house confirmed two new members for the Bank of Japan’s board who have signaled support for monetary stimulus.

Sentiment Slump

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge retreated 0.2 percent yesterday after the central bank cut its growth estimates after a slowdown in hiring last month.

“Markets had been hoping for a little bit more from the Fed,” said Stan Shamu, a market strategist at IG Markets in Melbourne, a provider of trading services in stocks, bonds and commodities. “Sentiment has really slumped after the lower growth forecast.”

Exporters declined. Samsung Electronics dropped 2 percent to 1.227 million won in Seoul. Quanta Computer Inc. (2382), the world’s largest contract manufacturer for laptop computers, sank 3.5 percent to NT$78.10 in Taipei. Li & Fung Ltd., a supplier of toys and clothes to retailers including Wal-Mart Stores Inc., slipped 2.8 percent to HK$15.32 in Hong Kong.

Energy and raw-material producers led losses among the 10 industry groups in the MSCI Asia Pacific Index (MXAP) as crude and copper futures fell. BHP Billiton lost 1.2 percent to A$32.20 in Sydney. Rio Tinto Group, the world’s third-biggest mining company by market value, slid 1.4 percent to A$56.90. Cnooc Ltd., China’s largest offshore oil producer, dropped 3.2 percent to HK$14.98 in Hong Kong.

Renesas, Yakult

The Asian benchmark index lost 9.5 percent through yesterday from this year’s highest level in February amid signs global economic growth was slowing as Europe struggled to contain its debt crisis. This left the gauge trading at 1.2 times book value, compared with 2.1 times for the S&P 500 and 1.4 times for the Stoxx 600, according to data compiled by Bloomberg. A number below one means companies can be bought for less than value of their assets.

Among stocks that advanced, Renesas gained 3.1 percent to 334 yen in Tokyo after the Yomiuri newspaper said KKR and Silver Lake are in talks to invest “several tens of billions of yen” in the Japanese chipmaker. “Nothing has been decided,” Yoichi Kobayashi, a spokesman for Renesas, said by phone.

Yakult Honsha Co. climbed 3.4 percent to 3,045 yen after the maker of fermented-milk drinks said it will continue talks with France’s Danone SA, which has said it wants to increase its stake from the current 20 percent.

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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