Asian stocks outside Japan fell, with a regional index heading for its first decline in four days, after an official gauge of manufacturing activity in China expanded at the slowest pace in four months.
Fortescue Metals Group Ltd. (FMG), Australia’s third-largest iron-ore producer which counts China as its biggest market, dropped 3 percent. CapitaLand Ltd. (CAPL) dropped 2.3 percent, pacing losses among Singapore’s homebuilders after the city’s central bank tightened lending rules to curb rising property prices. Toyota Motor Corp., the world’s No. 1 carmaker, gained 1.2 percent as the yen weakened against the dollar.
The MSCI Asia Pacific excluding Japan Index slid 0.5 percent to 430.07 at 10:02 p.m. in Tokyo, as nine of the 10 industry groups on the measure fell. The gauge last week posted its first quarterly slump in a year amid signs of an economic slowdown in China and after Federal Reserve Chairman Ben S. Bernanke said last month policy makers may start dialing down stimulus if the U.S. economy shows sustained improvement.
“China seems to be the biggest risk for markets now,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages more than $130 billion, said in a telephone interview. “If growth slows too much, unemployment will rise and this will lead to social unrest. We don’t know how far authorities will tolerate slower growth. The Japanese market appears to be building a base for the next leg of the rally. We may see further earnings upgrades as the benefits of Japan’s monetary stimulus begins to show.”
Australia’s S&P/ASX 200 Index slipped 1.9 percent. New Zealand’s NZX 50 Index lost 0.5 percent as trading resumed following a technical fault. South Korea’s Kospi Index slid 0.4 percent, Singapore’s Straits Times Index and Taiwan’s Taiex index retreated 0.3 percent. Markets in Hong Kong and Thailand are closed for holidays.
Japan’s Topix gained 1.5 percent, with volume on Japan’s broadest equity benchmark gauge 37 percent below the 30-day average. The yen weakened 0.5 percent to 99.63 per dollar.
Toyota gained 1.2 percent to 6,060 yen and Mazda Motor Corp., an automaker that gets 73 percent of sales abroad, rose 4.9 percent to 410 yen. A weaker yen boosts earnings for Japanese firms when repatriated from abroad.
Big Japanese manufacturers became optimistic for the first time since September 2011, indicating confidence in Prime Minister Shinzo Abe’s reflationary policies even amid stock market volatility. The quarterly Tankan index for large manufacturers rose to plus four in June, beating the plus three forecast by 22 economists surveyed by Bloomberg, and up from minus eight in March. A positive figure shows optimists outnumber pessimists.
“Recovery in Japan is going to be very crucial to the Asia-Pacific outlook at a time when Chinese growth is showing slowing momentum,” Rajiv Biswas, chief Asia economist at IHS Global Insight, told Bloomberg TV from Singapore. “In the near-term, the outlook is good and we’re going to see some positive data. I wouldn’t be overly concerned about the declines we’ve seen in the recent past.”
China’s Shanghai Composite Index gained 0.8 percent, having swung between gains and losses at least five times. The nation’s manufacturing expanded at the slowest pace in four months in June as a cash squeeze in the banking system reduced the flow of credit to companies. The Shanghai measure slumped 14 percent last month, capping the biggest monthly loss since August 2009.
The Purchasing Managers’ Index was at 50.1, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That matched the median forecast of 33 analysts in a Bloomberg News survey and was down from May’s 50.8. Readings above 50 signal expansion.
Growth in China has held below 8 percent for the past four quarters, the first time that has happened in at least 20 years. The World Bank lowered its 2013 expansion forecast for the nation last month to 7.7 percent from 8.4 percent previously.
Chinese President Xi Jinping said on June 29 officials shouldn’t be judged solely on their record in boosting gross domestic product, the latest signal that policy makers are prepared to tolerate slower economic expansion.
The MSCI Asia Pacific Index, which includes Japan, rose 0.2 percent today. It retreated 9.6 percent through the end of June from the closing level on May 20, which was the highest since June 2008. That left the gauge trading at 12.8 times average estimated earnings compared with 14.6 for the Standard & Poor’s 500 Index (SPX) and 12.6 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the Standard & Poor’s 500 Index added 0.5 percent, indicating the U.S. benchmark will add to last week’s gains as economic data topped estimates and comments by Federal Reserve officials eased concerns over plans to reduce stimulus.
Companies that do business with China fell. BHP Billiton Ltd., the world’s largest mining company, lost 1.4 percent to A$30.94 and Rio Tinto Group, the second biggest, slid 1.2 percent to A$51.73. Fortescue dropped 3 percent to A$2.95.
Singapore developers declined after the central bank told banks to assess borrower’s debts that are not related to property before granting mortgage approvals. Home loans should not exceed a total debt-servicing ratio of 60 percent and those that do will be considered “imprudent,” it said.
CapitaLand, Southeast Asia’s biggest real-estate company, dropped 2.3 percent to S$3.01. City Developments Ltd., Singapore’s second-largest developer, slipped 1.6 percent to S$10.53. UOL Group Ltd. decreased 2.7 percent to S$6.54.
Among stocks that gained, Hisamitsu Pharmaceutical Co. (4530) rose 6.4 percent to 5,360 yen in Tokyo. The Food and Drug Administration said on June 28 that it cleared unit Noven’s drug, to be called Brisdelle, as the first non-hormonal alternative approved to help women avoid sweating and feverish feelings linked to menopause.
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