Asian Stocks Post Weekly Drop as Topix Correction Deepens

Asian stocks fell for a third week, with the regional benchmark index posting its biggest weekly drop since May 2012, as the correction in Japanese shares deepened after the yen surged and speculation grew that the Federal Reserve may scale back stimulus.

Mazda Motor Corp. (7261), a Japanese carmaker that gets about 73 percent of revenue from overseas, tumbled 16 percent, leading Japanese exporters lower as a stronger yen crimped their earnings outlook. Samsung Electronics Co., the world’s biggest smartphone maker, sank 7.2 percent after JPMorgan Chase & Co. cut profit estimates. Newcrest Mining Ltd., Australia’s gold biggest producer, slumped 15 percent after saying it will write down the value of its mines after a slump in bullion prices.

The MSCI Asia Pacific Index dropped 3.3 percent this week to 130.37, 9.7 percent below this year’s high on May 20. Japanese stocks extended losses for a third week as Prime Minister Shinzo Abe’s growth strategy failed to impress investors and as mixed economic data from the U.S. added to concerns the recovery will stall if there is a premature withdrawal of stimulus. June futures on the Nikkei 225 Stock Average rose 4.1 percent, the most in two months, in Chicago, signaling shares may surge June 10 in Tokyo.

“It’s not that we’ve seen a dramatic shift in the Fed’s exit discussion, but investors are using it as an excuse to sell,” said Masahiko Ejiri, a Tokyo-based senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $34 billion in assets. “Some long positions are being unwound after the market rallied so fast.”

Buying Opportunity?

The MSCI Asia Pacific Index is still up 0.8 percent this year after the sell-off in the past three weeks. Shares on the gauge traded at 12.6 times average estimated earnings yesterday, compared with multiples of 15 for the Standard & Poor’s 500 Index and 13 for the Europe 600 Index, according to data compiled by Bloomberg.

Japan’s Topix index slumped 6.9 percent this week, the biggest weekly drop since March 18, 2011 in the aftermath of record earthquake, tsunami and subsequent nuclear disaster. The Nikkei 225 Stock Average declined 6.5 percent. Both gauges have dropped more than 17 percent from their recent high on May 22, close to the 20 percent threshold that some investors consider a bear market.

The country’s Government Pension Investment Fund, the world’s biggest manager of retirement savings with 112 trillion yen ($1.16 trillion) of assets, said after the market closed yesterday that it will reduce its holdings of local bonds and buy shares.

“The GPIF news could be used as a reason to buy shares,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees about $33 billion. “A lot of investors think that stocks have fallen to such a low level that it’s in a situation where buying resumes.”

Conflicting Signs

Australia’s S&P/ASX 200 Index decreased 3.8 percent, while New Zealand’s NZX 50 Index lost 1.6 percent. South Korea’s Kospi Index slipped 3.9 percent. Taiwan’s Taiex index fell 1.9 percent.

China’s Shanghai Composite Index dropped 3.9 percent this week as official and private reports on China’s factory activity offered conflicting views of the economy. A report released by HSBC Holdings Plc and Markit Economics on June 3 showed a contraction, while the official measure, released by the government on June 1 indicated expansion.

Hong Kong’s Hang Seng Index sank 3.7 percent, the biggest weekly drop since May 2012, after Nomura Holdings Inc. cut its rating to underweight from overweight. Equities in the city, whose currency is pegged to the U.S. dollar, are most vulnerable should the Federal Reserve start tightening monetary policy, Michael Kurtz, Nomura’s Hong Kong-based head of global equity wrote in a note on June 6.

Exporters Drop

Japanese exporters dropped as the yen posted its biggest weekly advance since October 2008. A stronger currency reduces the overseas income of Japanese carmakers and electronics manufacturers when repatriated.

Mazda tumbled 16 percent to 340 yen. Toyota Motor Corp., the world’s biggest carmaker, declined 8.8 percent to 5,480 yen Sony Corp. (6758), a Japanese exporter of consumer electronics that generates about 68 percent of its sales overseas, fell 9.5 percent to 1,854 yen.

Japanese brokerages slumped this week amid concern the retreat in the nation’s stockmarket would crimp profits. Nomura, Japan’s biggest brokerage, sank 9.8 percent to 712 yen. Daiwa Securities Group Inc., the second-largest, fell 6.6 percent to 801 yen.

Samsung, Newcrest

Samsung Electronics slumped 7.2 percent to 1.427 million in Seoul after analysts at JPMorgan cut profit estimates, citing slowing demand for its flagship Galaxy S4.

Newcrest dropped 15 percent to A$12.35 in Sydney. The company may write down the value of its mines by as much as A$6 billion ($5.7 billion) after a slump in gold prices.

Cochlear Ltd. slumped 14 percent to A$55.65 after the maker of hearing aid implants said sales were weaker in the second half.

Hong Kong developers declined after a report on June 4 showed the number of home transactions in the city fell for a third straight month in May. Sun Hung Kai Properties Ltd., the biggest homebuilder in the Chinese territory, slid 4 percent to HK$99.10. Cheung Kong Holdings Ltd., the real estate company partly owned by billionaire Li Ka-shing, sank 5.4 percent to HK$103.90.

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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