Asian Stocks Decline as South Korean Carmakers Slide

Asian stocks fell as Hyundai Motor Co. and Kia Motors Corp. (000270) slid on findings they overstated claims about gas mileage. Trading volume in the region was below average before tomorrow’s U.S. presidential election.

Hyundai and Kia slumped more than 6 percent in Seoul after saying they will compensate U.S. customers for overstating the fuel efficiency of their latest cars. Sharp Corp. slid 6.7 percent on speculation the Japanese TV maker will seek a bailout after forecasting a record loss. Foxconn International Holdings Ltd. surged 32 percent in Hong Kong on speculation it will win orders to manufacturer parts for Apple Inc.’s iPhone 5.

The MSCI Asia Pacific (MXAP) Index slid 0.3 percent to 122.22 as of 6:22 p.m. in Tokyo. More than three shares fell for every two that rose, with indexes of utilities and makers of cars and electronics leading drops among the benchmark’s 10 industry groups.

“Many people are not convinced on the rebound in equities of the last few months and you can see this with disappointing volumes,” said Benjamin Tam, who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. “I don’t see there being significant change until the political situation stabilizes in China and the U.S., and Europe is still a worry.”

Asia’s equities benchmark gained about 12 percent from this year’s low in May as central banks added stimulus to counter a global economic slump and the European debt crisis. Shares on the measure trade at 13.2 times average estimated earnings, compared with 13.7 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index.

Futures on the S&P 500 rose less than 0.1 percent today. The gauge dropped 0.9 percent on Nov. 2 even as U.S. payroll growth signaled recovery in the jobs market.

U.S. Jobs

The Labor Department said 171,000 workers were added to payrolls last month, surpassing the most optimistic forecast in a Bloomberg survey in which the median called for an advance of 125,000. President Barack Obama is leading Republican challenger Mitt Romney by 3 points, according to an Oct. 31-Nov. 3 Pew Research Center survey.

Japan’s Nikkei 225 Stock Average (NKY) lost 0.5 percent today, halting a three-day advance. South Korea’s Kospi slid 0.6 percent, with trading volume 35 percent below the 30-day average. Australia’s S&P/ASX 200 Index gained 0.3 percent.

Hong Kong’s Hang Seng (HSI) retreated 0.5 percent from its highest close this year. The Hang Seng China Enterprises Index of mainland companies lost 0.2 percent. The measure entered a so-called bull market on Nov. 2, rising more than 20 percent from a Sept. 5 low, on speculation China’s economy is stabilizing.

China’s Transition

The Shanghai Composite Index slipped 0.1 percent, erasing gains after the HSBC Services purchasing managers’ index dropped to 53.5 in October from 54.3 a month earlier.

China’s Communist Party starts its 18th Congress on Nov. 8, when 2,270 delegates meet over several days to pick a new leader. Xi Jinping will probably replace Hu Jintao as general secretary of the party that’s ruled China since 1949.

Hyundai, South Korea’s top carmaker, lost 7.2 percent to 199,500 won. Kia Motors, the country’s second biggest, slid 6.9 percent to 56,300 won. The companies will have to re-label the window stickers on their vehicles for overstating gas mileage, the U.S. Environmental Protection Agency said Nov. 2.

‘Reputational Loss’

“This could be a game-changing event in Hyundai’s success story,” said James Yoon, a Seoul-based analyst at BNP Paribas SA. “The financial loss is immaterial compared to the potential reputational loss” to its brand.

Japanese carmakers benefited from the stumble. Honda Motor Co. advanced 1.2 percent to 2,497 yen in Tokyo. Toyota Motor Corp. gained 2.2 percent to 3,210 yen. After markets closed, the automaker raised its full-year profit forecast to a five-year high of 780 billion yen ($9.7 billion) as demand for the Prius hybrid in the U.S. and Japan helped make up for slumping sales in China.

Sharp slid 6.7 percent to 154 yen. After failing to secure an investment from Foxconn Technology Group, the money-losing electronics maker may have to ask the government for funds, said Fumiaki Sato, co-founder of Sangyo Sosei Advisory Inc. a turnaround advisory firm in Tokyo.

Singapore Airlines Ltd., the world’s third-largest carrier by market value, lost 1.1 percent to S$10.46 as profit tumbled on a wider loss at its cargo unit. The company plans to pare cargo capacity as it contends with slower trade and competition from Middle East carriers.

Reactor Faultline

Kansai Electric Power Co. led Japanese utilities lower as seismologists advising the regulator disagreed about whether a faultline under one its nuclear plants is active. Kansai tumbled 6.8 percent to 575 yen. Hokkaido Electric Power Co. fell 4.5 percent to 640 yen.

Among shares that advanced, Samsung Electronics Co. gained 1.1 percent to 1.34 million won. The smartphone maker may release its next Galaxy S (005930) as early as the second quarter of next year, Maeil Business reported, citing industry officials. Separately, Citigroup Inc. said global smartphone shipments will beat estimates by as much as 30 percent next year.

Foxconn International soared 32 percent to HK$3.60 in Hong Kong, the most in at least seven years. There’s a “high chance” shareholder Hon Hai Precision Industry Co. will allocate iPhone 5 orders to Foxconn, Daiwa Securities Co. analyst Chia-Lin Lu said in a phone interview.

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

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

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