Asian Stocks Erase Gain as Topix Drops on Strong Yen

Photographer: Junko Kimura/Bloomberg

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Photographer: Junko Kimura/Bloomberg

A pedestrian walks past an electronic stock board displaying a chart of the yen against the U.S. dollar outside a securities firm in Tokyo.

Asian stocks dropped, with the regional benchmark index retreating from a five-year high. Japan’s Topix Index erased gains as the yen strengthened, dimming the outlook for the nation’s exporters.

Canon Inc. (7751), which loses almost $80 million for every 1 yen Japan’s currency gains against the dollar, fell 1 percent. Bridgestone (5108) Corp., the world’s biggest tire maker, sank 6.6 percent in Tokyo after keeping its full-year profit forecast below analyst estimates. GS Engineering & Construction Corp. jumped 6.8 percent after the Bank of Korea cut interest rates.

The MSCI Asia Pacific Index slipped 0.3 percent to 143.00 as of 6:20 p.m. in Tokyo. The gauge increased 11 percent this year through yesterday amid speculation the Bank of Japan will deploy more measures to beat deflation as policy makers in the U.S. and Europe remain on standby to buoy growth.

“It’s not surprising that shares slipped a bit after big gains,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of about $61 billion. “It’d be odd if they didn’t have a correction.”

Shares on the gauge traded at 14.3 times estimated earnings yesterday compared with 20.7 for the Nikkei 225 (NKY) Stock Average, 14.8 for the Standard & Poor’s 500 Index and 13.3 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The Nikkei 225’s 14-day relative strength index, which measures trading momentum, climbed above the 70 threshold for a third day, indicating to some traders that shares have risen too far, too fast. The gauge rose 37 percent this year through yesterday, making it the best-performing developed market benchmark equity index in the world.

Shares Inexpensive

“The market may have a correction after rising so steeply, but valuation-wise you can’t say shares are very expensive,” said Masaru Hamasaki, a Tokyo-based strategist at Sumitomo Mitsui Asset Management Co., which oversees the equivalent of $103 billion.

Japan’s Nikkei 225 fell 0.7 percent. The broader Topix Index (TPX) slipped 1.1 percent, retreating from the highest since September 2008. The Japanese yen climbed as much as 0.4 percent against the dollar today, paring this week’s decline. A stronger yen reduces the value of exporters’ earnings when repatriated.

Australia’s S&P/ASX 200 Index was little changed after a report showed the nation’s unemployment rate fell in April as companies hired more workers than analysts estimated. New Zealand’s NZX 50 Index also was little changed.

China Inflation

The Shanghai Composite Index slipped 0.6 percent. China’s consumer prices rose 2.4 percent last month from a year earlier, while producer prices fell 2.6 percent, the National Bureau of Statistics said today in Beijing. Hong Kong’s Hang Seng Index dropped 0.1 percent.

South Korea’s Kospi Index jumped 1.2 percent after the nation’s central bank today joined Australia, Europe and India in cutting interest rates. Taiwan’s Taiex Index added 0.2 percent and Singapore’s Straits Times Index climbed 0.6 percent.

Futures on the S&P 500 Index slipped 0.1 percent today. The gauge yesterday climbed 0.4 percent, a fifth day of gains, as earnings forecasts from Whole Foods Market Inc. and Electronic Arts Inc. beat estimates.

Japanese exporters fell. Canon, the world’s biggest camera maker, slipped 1 percent to 3,470 yen. Toyota Motor Corp. (7203), the world’s largest carmaker, fell 1.4 percent to 5,760, erasing gains of as much as 2.2 percent. Honda Motor Co. dropped 1.3 percent to 3,930 yen.

Bridgestone, Sumitomo

Bridgestone declined 6.6 percent to 3,475 yen. The company said yesterday it expects full-year net income will increase 37 percent to 235 billion yen. That compares with the 254 billion yen average estimate by 14 analysts compiled by Bloomberg.

Sumitomo Heavy Industries Ltd. (6302) slumped 11 percent to 409 yen, the most on the MSCI Asia Pacific Index. The Japanese shipbuilder said net income for the year ending March 2014 will more than double to 14 billion yen, missing the 17.6 billion yen average estimate by eight analysts in a Bloomberg survey.

Of the 312 companies that reported earnings since the beginning of April and for which estimates are available, 52 percent exceeded expectations, while 48 percent fell short, according to data compiled by Bloomberg.

Among stocks that advanced, News Corp. (NWSA) climbed 2.9 percent to A$32.47 in Sydney after saying third-quarter net income tripled to $2.85 billion on higher licensing fees for cable networks such as Fox News. Profit at the Rupert Murdoch-led media company was 36 cents a share excluding some items, versus the 35 cents average of analyst estimates compiled by Bloomberg.

South Korean builders gained. GS Engineering jumped 6.8 percent to 32,800 won. Hyundai Engineering & Construction Co. (000720), the nation’s biggest construction company, rose 3.2 percent to 62,000 won. Samsung Engineering Co. increased 5.9 percent to 102,000 won.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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