Asian Stocks Fall on China-Japan Tension, Europe Concerns

Asian stocks fell as tensions between Japan and China increased, pushing down shares of Tokyo- listed companies from Honda Motor Co. (7267) to Fast Retailing Co. amid signs of slowing growth in the U.S. and a worsening European debt crisis.

BHP Billiton Ltd. (BHP), the world’s largest mining company, slid 0.6 percent in Sydney as metal prices dropped. Fast Retailing, Asia’s biggest apparel chain, tumbled 7 percent, in Tokyo as it was forced to shut stores in China amid anti-Japanese protests. Hokuriku Electric Power Co. surged 6.4 percent after a Japanese government minister signaled he has no plans to stop construction of nuclear reactors.

The MSCI Asia Pacific Index lost 0.2 percent to 123.1 as of 7:15 p.m. in Tokyo, with about five stocks falling for every four that rose. Gains among utilities limited losses on Japan’s Nikkei 255 Stock Average as equity markets reopened today after a public holiday.

“There is concern that anti-Japanese protests may reduce investment into China in the mid- and long-term,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about 15 trillion yen ($191 billion). “The situation is uncertain and we don’t know how long it will last.”

Honda, Toyota Motor Corp. (7203) and Nissan Motor Co. all reported damage to dealerships in the eastern Chinese city of Qingdao as protesters smashed store fronts and cars in demonstrations sparked by Japan’s purchase last week of islands claimed by both countries.

Annual Gain

The MSCI Asia Pacific Index (MXAP) rose more than 8 percent this year through yesterday compared with a 16 percent gain on the S&P 500 and a 12 percent advance for the Stoxx Europe 600 Index amid speculation central banks will step up measures to promote global economic growth. The Asian benchmark traded at 12.8 times estimated earnings compared with 14.1 for the S&P 500 and 12.2 for the Stoxx Europe 600 Index.

Japan’s Nikkei 225 Stock Average (NKY) slid 0.4 percent and the broader Topix Index (TPX) advanced 0.2 percent. South Korea’s Kospi Index gained 0.1 percent and Australia’s S&P/ASX 200 Index fell 0.2 percent.

Hong Kong’s Hang Seng Index slipped 0.3 percent and China’s Shanghai Composite lost 0.9 percent. Singapore’s Straits Times Index declined 0.4 percent and Taiwan’s Taiex Index slipped 0.4 percent.

Futures on the Standard & Poor’s 500 Index lost 0.3 percent today. The index fell 0.3 percent in New York yesterday, when the Federal Reserve Bank of New York said its general economic index of manufacturing dropped to minus 10.41, the lowest reading since April 2009, from minus 5.85 in August. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

Spanish Aid

European Central Bank Governing Council member Luc Coene said rising bond yields may force Spain into asking for aid and submitting to the ECB’s conditions for granting it. Spanish bond yields climbed past 6 percent yesterday for the first time since Sept. 7, the day after ECB President Mario Draghi gave details of the central bank’s new government bond purchase plan.

If “markets see that Spain will not” ask for assistance, “then it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program,” Coene said at a panel discussion in London yesterday.

BHP Billiton fell 0.6 percent to A$33.96 and Rio Tinto Ltd. slid 0.4 percent to A$57.25 in Sydney after the London Metal Exchange Index of industrial metals lost 0.8 percent yesterday.

Island Spat

Japanese companies that do business in China dropped as the territorial dispute sparked the worst diplomatic crisis between the two nations since 2005, putting at risk a trade relationship that’s tripled in the past decade to more than $340 billion.

Honda slid 2.5 percent to 2,604 yen. Nissan, the biggest Japanese automaker by sales in China, sank 5 percent to 701 yen. Fast Retailing (9983), which had the biggest decline in the Asia- Pacific index, slumped 7 percent to 17,480 yen after it shuttered 42 Uniqlo shops in China.

Local partner to Honda and Toyota, Gaungzhou Automobile Group Co. (2238), dropped 1.8 percent to HK$5.36. It fell 4.6 percent yesterday.

Ajisen (China) Holdings Ltd., a Hong Kong-listed Ramen- noodle restaurant-chain operator, slipped 0.8 percent to HK$4.97. The company, whose shares fell 7.1 percent yesterday, has been forced to close some stores after being targeted by rioters, Haitong International Securities Co. analyst Gloria Wang wrote in a note.

Nuclear Japan

Japanese utilities gained the most among 33 industry groups on the Topix Index after the Nikkei newspaper reported Japanese Trade Minister Yukio Edano signaled he has no plans to stop construction of reactors that have already been approved, despite a goal to scrap nuclear power by the end of the 2030s.

Hokuriku Electric soared 6.4 percent to 917 yen. Tohoku Electric Power Co. jumped 4.3 percent to 535 yen.

Fortescue Metals Group Ltd. (FMG) surged 17 percent to A$3.50 after Australia’s third-biggest iron-ore producer arranged $4.5 billion of new debt to refinance bank loans, easing concern the Perth-based company may need to sell assets or stock to repay debt.

Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, gained 4.5 percent to 1,027 yen after public broadcaster NHK reported on Sept. 14 the company will invest about 50 billion yen ($636 million) in Olympus Corp. and set up a company to manufacture medical equipment.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; 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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