Asian Stocks Decline for Fifth Week on Stimulus Concern

Asian stocks outside Japan fell for a fifth week, the longest streak of losses in two years, amid concern central banks are losing an appetite for more stimulus. Japanese stocks rebounded the final day of the week as Nomura Holdings Inc. and Fidelity Worldwide advised buying shares.

Newcrest Mining Ltd. fell a third week amid after the Australia’s biggest gold producer said it will write down the value of its assets by as much as $5.7 billion. Nomura Holdings Inc., Japan’s largest brokerage, climbed 1.3 percent with the Topix index little changed after a fourth week of swings. Chinese shares in Hong Kong capped a record losing streak.

The MSCI Asia Pacific excluding Japan Index dropped 1.3 percent this week to 440.07, extending this year’s loss to 6.6 percent. A gauge that includes Japanese shares added 0.3 percent for the week. The Hang Seng China Enterprises Index fell for a record 12 straight days through June 14 amid concern that growth is slowing in the world’s No. 2 economy.

“There’s lots of confusion around the world at present about what central bank policy means for the outlook of the global economy, earnings and valuations,” Matthew Sherwood, the Sydney-based head of investment market research at Perpetual Ltd., which manages about $25 billion, said by e-mail. “The Fed is likely to continue to be ambiguous about its next step, probably because it’s not sure. This will see markets continue to be volatile.”

More than $1 trillion was wiped from the value of the Asia-Pacific benchmark equities gauge from May 20 through June 13.

Unwinding Stimulus

Investors have sold shares amid concern that global central banks won’t inject more funds in the event that the U.S. Federal Reserve decides to begin winding back its record stimulus program. Investors pulled $8.5 billion from global equity funds in the week to June 12, according to Citigroup Inc.

The Bank of Japan kept its policy unchanged June 11 and refrained from allowing longer fixed-rate loans to banks to stem debt market volatility, even after spikes in Japanese government bond yields.

Investors will scrutinize discussions among policy makers at the U.S. central bank when they meet next week after Fed Chairman Ben S. Bernanke said May 22 that the central bank could scale back stimulus should the job market show “sustainable improvement.”

“People are still trying to assess the prospects, likelihood and timing of tapering from the Federal Reserve,” Chris Green, an Auckland-based strategist at First NZ Capital Ltd., a brokerage and wealth management firm, said. “Markets want stability in the economy but they also want unlimited stimulus. The two can’t continue to exist together.”

Emerging Outflow

Overseas investors unloaded a net $2.7 billion from the Thai, Indonesian and Philippine stock markets so far this month, the biggest eight-day outflow since Bloomberg began compiling the data in March 1999. The three countries had led the four-year rally in global stocks through last month, and are now among the biggest losers.

Hong Kong’s Hang Seng Index (HSI) fell 2.8 percent this week, a fifth week of declines, making it the worst performer among the world’s developed equity markets, according to data compiled by Bloomberg. The Hang Seng China Enterprises gauge fell 5.1 percent, taking the decline to 21 percent, and pushing the so-called H-shares into a bear market.

China’s Shanghai Composite Index retreated 2.2 percent, dragging valuations for the benchmark index to a six-month low.

Australia’s S&P/ASX 200 Index added 1.1 percent, while New Zealand’s NZX 50 Index lost 0.4 percent. South Korea’s Kospi Index slipped 3.9 percent and Taiwan’s Taiex index fell 2 percent. Singapore’s Straits Times Index lost 0.7 percent.

Friday Rally

Japanese shares rallied the final day of the trading week after Nomura Holdings Inc. and Fidelity Worldwide said the country’s market would climb to new highs. The gains weren’t enough to recoup losses from earlier in the week.

The Topix index sank 0.1 percent this week, a fourth week of losses following on from its worst three-week decline since the the global financial crisis in 2008. The Nikkei 225 Stock Average dropped 1.5 percent, falling into a bear market after retreating more than 20 percent from a May 22 high.

Even after a 17 percent fall from last month, the Topix has climbed 23 percent this year, making it the best-performing major equity gauge in the developed world.

With more than $500 billion wiped from Japan’s equity markets from the May high through June 13, brokerages and investors are seeing buying opportunities.

‘Bullish Stance’

“Assuming that Abenomics has not been defeated, we see no reason to become bearish on Japanese stocks, and recommend a bullish stance,” analysts led by Hiromichi Tamura at Nomura wrote in a report June 13. The brokerage increased its year-end estimate for the Topix to 1,500 from 1,350, while boosting the outlook for earnings per share to 82.5 from 75.

Analysts say earnings for Topix companies will jump 53 percent this fiscal year to 78.85 yen a share. After retreating 18 percent since May 22, the gauge is trading at 13.4 times estimated earnings, compared with 16.6 in May and the three-year average of 14.6. The Standard & Poor’s 500 Index, where earnings are expected to rise 11 percent this year, trades for 14.8 times forecast profit.

“There are reasons to be optimistic that further weakness will be temporary and that the peak is not behind us,” Alex Treves, head of equities Japan for Fidelity Worldwide, which manages about $248 billion, said by e-mail. “The key drivers of the rally remain intact, valuations are still reasonable and earnings are projected to recover to 2007 highs.”

China Stocks

ICBC as the world’s biggest lender is known, dropped 3.2 percent to HK$5.07 as data pointed to slowing economic growth in China and the World Bank cut its outlook for global expansion. Aluminum Corp. of China, the nation’s No. 1 producer of the light metal, tumbled 10 percent to HK$2.60. Zijin Mining Corp., China’s No. 1 gold miner, plunged 13 percent to HK$1.81.

Newcrest Mining slid 6.3 percent to A$11.57, among the worst performers on the Asia-Pacific benchmark this week. Bank of America Corp. cut its recommendation on shares of the gold producer, citing risks of a capital-raising should the price of the precious metal fall below $1,200 an ounce. The write downs and a plan to cut about 250 jobs were “painful,” though a necessary response to gold’s decline, Chief Executive Officer Greg Robinson told analysts on a conference call June 7.

ASX Ltd. (ASX) posted the biggest weekly loss in 3 1/2 years, falling 6.1 percent to A$33.15, amid a A$553 million ($530 million) capital raising at the operator of Australia’s main stock exchange to ensure its clearing business complies with new regulations.

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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