Asian Stocks Fall as Preliminary China PMI Contracts

Photographer: Yuriko Nakao/Bloomberg

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Photographer: Yuriko Nakao/Bloomberg

A man is reflected in an electronic stock board displaying the Nikkei 225 Stock Average figure, top right, and other indices in Tokyo.

Most Asian stocks fell, with the regional benchmark index retreating from a two-month high, after a private survey showed China’s manufacturing contracting at a faster-than-estimated pace.

PetroChina Co., the country’s No. 1 energy producer, sank 2 percent in Hong Kong. Kao Corp., a maker of household and chemical products, fell 6.2 percent in Tokyo after giving an update on a product recall. LG Innotek Co. and Inventec Corp. led gains among Apple Inc. suppliers in Asia after the iPhone and iPad maker topped analysts’ earnings projections in the third quarter.

The MSCI Asia Pacific Index fell 0.1 percent to 137.07 as of 6:23 p.m. in Hong Kong, reversing gains of as much as 0.2 percent. About five shares declined for every four that rose on the gauge. The measure dropped 4.9 percent through yesterday from this year’s high on May 20 amid signs China’s economic slowdown is deepening and concern the Federal Reserve will start tapering monetary stimulus as the U.S. economy improves.

“We know China is slowing, but we just don’t know who to believe in China over whether we see sub-7 percent or 7 percent growth,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. “The market globally, including emerging markets, has become a lot more comfortable with the tapering exercise and it’s not going to have massive negative ramifications for emerging markets and global equities.”

Premier Li Keqiang said China’s “bottom line” for gross domestic product growth is 7 percent and the nation can’t let growth go below that, Beijing News reported yesterday, citing comments at a recent meeting with economists and businesspeople. The “lower limit” for China’s GDP growth is 7.5 percent, Li was cited as saying.

China PMI

Japan’s Topix index lost 0.2 percent, while the Nikkei 225 Stock Average slipped 0.3 percent. Hong Kong’s Hang Seng Index added 0.2 percent after falling as much as 0.5 percent. China’s Shanghai Composite declined 0.5 percent, paring a decline of 1.6 percent.

China’s manufacturing weakened further in July, signaling the worst of the nation’s slowdown has yet to be reached, according to a preliminary survey of purchasing managers.

The reading of 47.7 for an index released today by HSBC Holdings Plc and Markit Economics was less than estimated and if confirmed in the final report on Aug. 1, would be the lowest in 11 months. Readings below 50 indicate contraction.

’Minimum Growth’

“China’s central government already mentioned about minimum growth,” said Masahiko Ejiri, a Tokyo-based senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $34 billion. “If the economy continues to slow down it would mean the government has to provide more stimulus for the economy. There’s concern they may spend the stimulus in a very inefficient way.”

PetroChina dropped 2 percent to HK$9.26. ZTE Corp., China’s second-largest maker of equipment for phone networks, fell 3 percent to HK$13.42 after yesterday surging by the most since 2008 on a jump in first-half earnings.

Taiwan’s Taiex Index fell 0.2 percent, while Singapore’s Straits Times Index gained 0.7 percent. Australia’s S&P/ASX 200 and New Zealand’s NZX 50 Index rose 0.4 percent.

Shares on the MSCI Asia Pacific Index traded at 13.5 times estimated earnings as of yesterday, compared with 15.4 times for the Standard & Poor’s 500 Index and 13.4 times for the Stoxx Europe 600 Index.

U.S. Futures

Futures of the Standard & Poor’s 500 Index gained 0.2 percent today. The measure slid 0.2 percent in New York yesterday as investors weighed corporate earnings amid speculation on when the Federal Reserve may scale back its asset purchases. The Richmond Fed’s gauge of manufacturing in the mid-Atlantic region unexpectedly fell to minus 11 in July.

Apple, maker of the iPhone and iPad, rallied after the close of U.S. exchanges. The Cupertino, California-based company reported earnings of $7.47 a share in the quarter ended June 29, compared with an average analyst estimate of $7.30. Sales rose to $35.3 billion, beating a projection of $35 billion.

LG Innotek, the South Korean camera-module supplier, surged 3.5 percent to 93,700 won in Seoul, the highest close since June 19. The company, which today reported stronger-than-estimated second-quarter profit, gets 3.3 percent of its revenue from Apple, according to data compiled by Bloomberg.

Taiwan’s Inventec Corp., maker of Apple notebooks, surged 6.8 percent to NT$21.15. AAC Technologies Holdings Inc. (2018), which gets 37 percent of sales from the U.S. company, climbed 3.2 percent to HK$35.55 in Hong Kong.

Kao sank 6.2 percent to 3,230 yen in Tokyo after yesterday saying 2,250 people reported the appearance of white blotches on their skin after using its brightening products.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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