Asian Stocks Outside Japan Post Weekly Decline on Europe

Asian stocks outside Japan fell this week after the European Central Bank said the euro’s strength could hamper an economic recovery. Japanese shares gained as the yen fell after Bank of Japan Governor Masaaki Shirakawa said he will step down ahead of schedule.

Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest market, dropped 2.1 percent. Soho China Ltd., the biggest developer in Beijing’s central business district, sank 9.3 percent in Hong Kong after a report linked the company to money laundering. Toyota Motor Corp. climbed 8.9 percent in Tokyo after the world’s biggest carmaker increased its profit outlook to a five-year high.

The MSCI Asia Pacific Excluding Japan Index slipped 0.5 percent this week to 476.25 as European Central Bank President Mario Draghi yesterday said growth risks remain as European Union leaders meet in Brussels to seek agreement on a budget. Shares on the gauge advanced in the past five months amid signs of economic recovery in China and the U.S.

“It’s a return of worries about Europe,” said Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd., which has about $126 billion under management. “The market got very stretched and was due for a pullback, it was just a question of what the trigger would be. We could still see some further weakness this month.”

Japan’s Topix Index gained 1.6 percent this week, extending its rally to a 13th week. The streak, the longest since 1973 has boosted valuations for the MSCI Asia Pacific Index. Asia’s regional gauge traded at 14.8 times average estimated earnings compared with 13.6 for the Standard & Poor’s 500 Index and a multiple of 12.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Disappointing Results

The Nikkei 225 Stock Average, Japan’s benchmark index, lost 0.3 percent this week, snapping a 12-week winning streak, after companies including Nikon Corp. and Sony Corp. posted disappointing earnings in Tokyo.

The BSE India Sensitive Index fell 1.5 percent this week, the most among major Asia Pacific gauges, after the government forecast the weakest economic growth in a decade. South Korea’s Kospi Index slipped 0.4 percent, Hong Kong’s Hang Seng Index dropped 2.1 percent. Australia’s S&P/ASX 200 Index climbed 1 percent

The Shanghai Composite Index added 0.6 percent as reports yesterday showed inflation gained and the nation’s exports rose more than forecast in January. Markets in China and Taiwan will be shut next week for the Lunar New Year holidays, while those in Hong Kong will close from Feb. 11 through Feb. 13.

Europe Turmoil

Companies that do business in Europe dropped on speculation political turmoil will make it difficult for governments to lead their countries out of recession. Spanish Premier Mariano Rajoy faces calls to resign amid contested reports about illegal payments, and Italy’s Silvio Berlusconi narrowed the front- runner’s lead before elections this month.

Esprit dropped 2.1 percent to HK$10.34 in Hong Kong. HSBC Holdings Plc, Europe’s biggest lender, lost 1.9 percent to HK$86.35. Konica Minolta Holdings Inc., a Japanese maker of imaging equipment that gets 28 percent of sales from Europe, slipped 4.3 percent to 711 yen.

Nikon slumped 19 percent this week to 2,077 yen after Japan’s third-largest camera maker reduced its profit forecast on slowing demand from Europe. Yamaha Corp. sank 11 percent to 857 yen after the maker of musical instruments lowered its full- year earnings forecast to break-even.

“We are in a bull market, but investors are still concerned about earnings,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about $160 billion).

Sony Losses

Sony plunged 11 percent yesterday, the most since November 2008, after the maker of Bravia televisions and PlayStation game consoles posted an unexpected loss. The decline pared gains earlier in the week to a five-day increase of 0.7 percent at 1,365 yen.

Of the 291 companies on the MSCI Asia Pacific index that have reported earnings so far this quarter and for which Bloomberg has estimates, 52 percent have exceeded profit expectations, while 48 percent missed forecasts, according to data compiled by Bloomberg.

HTC Corp. sank 6.4 percent to NT$271.50 in Taipei after the smartphone maker said first-quarter revenue will be between NT$50 billion ($2 billion) and NT$60 billion, below the NT$64.8 billion average of analysts’ estimates compiled by Bloomberg.

Developers led the rout in Hong Kong, with Sun Hung Kai Properties Ltd., the world’s biggest real estate company by value, dropping 2.6 percent to HK$122.40 this week. New World Development Co., which led gains in the benchmark Hang Seng Index last year, fell 2.8 percent to HK$13.70.

“Lots of people are taking profits and worrying there will be measures from the Hong Kong government to cool down the local property market,” Steven Leung, a Hong Kong-based institutional sales director at UOB Kay Hian Ltd., said.

Money Laundering

Soho China slumped 9.3 percent to HK$6.27. The Beijing Times reported a woman who may have been involved in money laundering bought most of her 41 properties from Soho. The newspaper cited comments posted to a microblog on Sina Corp.’s Twitter-like Weibo service. The company denied the claim.

China Petroleum & Chemical Corp. fell 8.1 percent to HK$8.61 in Hong Kong after Asia’s biggest refiner said it plans to sell shares worth HK$24 billion ($3.1 billion) at a discount.

Shirakawa Steps Down

Mizuho Financial Group Inc. led gains among Japanese lenders on speculation BOJ Governor Shirakawa’s replacement will be more aggressive in fighting deflation. Shirakawa this week said he and two deputy governors will step down on March 19, two weeks before the end of his term.

Mizuho advanced 13 percent to 207 yen. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, added 3.1 percent to 531 yen. Sumitomo Mitsui Financial Group Inc. rose 2.5 percent to 3,745 yen.

Toyota climbed 8.9 percent to 4,895 yen after Japan’s biggest manufacturer raised its full-year net income forecast by 10 percent to its highest in five years. The shares have gained almost 60 percent in Tokyo trading since the yen began tumbling in mid-November, adding more than $50 billion in market value.

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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