Asia Stocks Fall as Treasury Warns of U.S. Impasse Impact

Asian stocks fell, with the regional index posting its first weekly loss in more than a month, as concern grew that the U.S. political impasse could lead to the government defaulting on its debt.

Blumont Group Ltd. (BLUM), which invests in minerals and energy resources, slumped 56 percent in Singapore before trading was suspended after it agreed to buy an unnamed overseas coal producer. Digital Garage Inc. (4819) sank 10 percent after a Twitter Inc. filing failed to mention the Tokyo-based company as a shareholder. Universal Robina Corp. slipped 4.9 percent after parent JG Summit Holdings Inc. sold shares of the Philippine food and beverage company at a discount.

The MSCI Asia Pacific Index lost 0.3 percent to 139.04 as of 7:37 p.m. in Tokyo, with nine of the 10 industry groups on the gauge falling. U.S. President Barack Obama canceled plans to attend two economic summits in Asia next week as the fiscal standoff with congressional Republicans kept the U.S. government partially shuttered.

“Creeping worries about the U.S. debt ceiling are starting to unnerve investors,” Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in an e-mail to clients. “Expect more whippy and nervous trading.”

The Asia-Pacific gauge lost 1.3 percent this week as the failure of U.S. lawmakers to avert a government shutdown fueled concern they won’t be able to agree on raising the nation’s $16.7 trillion debt limit later this month. The Treasury Department warned that a federal default could lead to a recession as bad as the 2008 financial crisis or worse.

Relative Value

The MSCI Asia Pacific Index has advanced 7.5 percent so far this year, pushing valuations on the regional gauge to 13.4 times estimated earnings, according to data compiled by Bloomberg. That compares with 15.1 for the Standard & Poor’s 500 Index and 14.1 for the Stoxx Europe 600 Index, the data show.

Japan’s Topix index dropped 0.9 percent. The Bank of Japan today maintained its monetary policy at the end of a two-day meeting, as economists surveyed by Bloomberg had forecast.

New Zealand’s NZX 50 Index lost 0.2 percent and Australia’s S&P/ASX 200 Index (AS51) retreated 0.5 percent. Hong Kong’s Hang Seng Index fell 0.3 percent. Singapore’s Straits Times Index slipped 0.2 percent and South Korea’s Kospi index declined 0.1 percent. Taiwan’s Taiex index added 0.1 percent. China’s markets are closed for holidays until Oct. 8. India’s S&P BSE Sensex Index gained 0.1 percent.

Futures on the S&P 500 rose 0.2 percent today. The gauge declined 0.9 percent yesterday, the most in a month, as Treasury said the government will run out of borrowing authority Oct. 17, leaving only cash to pay the bills.

‘Catastrophic Effect’

“Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments and slow economic growth could last for more than a generation,” the Treasury said in its report.

“In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth -- with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression,” the department said.

U.S. Payrolls

A report yesterday showed fewer Americans than forecast filed applications for unemployment benefits last week. Jobless claims rose to 308,000 in the week ended Sept. 28, from a revised 307,000, the Labor Department said. The median forecast of 50 economists surveyed by Bloomberg called for an increase to 315,000.

U.S. payrolls data won’t be released as scheduled today because of the government shutdown. The department said that an alternative date for the September payrolls report and jobless rate hasn’t been scheduled.

“The absence of the U.S. jobs data creates uncertainty, which is reflected generally in greater equity market volatility,” said Chad Padowitz, Melbourne-based chief investment officer at Wingate Asset Management. “The longer the current situation holds, the less information people know about what’s happening in the underlying economy.”

Blumont tumbled 56 percent to 88 Singapore cents before trading was suspended. The company said today it will issue new shares at S$2.02 to fund the acquisition of an unnamed coal company traded overseas for as much as S$145.9 million ($117 million).

Trading Suspensions

Blumont was among three commodity investors suspended by in Singapore today after shares plunged. “This is to safeguard the interests of the markets as there could be circumstances that would result in the market not being fully informed,” Singapore Exchange Ltd. said in a statement.

Digital Garage dropped 10 percent to 2,817 yen in Tokyo. Investors were expecting that Twitter would disclose that the company is a shareholder, David Gibson, an analyst at Macquarie Securities based in Tokyo, said in a telephone interview. Twitter filed an S-1 with the Securities and Exchange Commission in the U.S. that listed major individual shareholders and institutional shareholders with stakes of more than 5 percent.

Universal Robina declined 4.9 percent to 117 pesos in Manila. Parent JG Summit raised about 12 billion pesos ($278 million) from the sale of 105 million Universal Robina shares at 115 pesos each, according to a stock exchange filing today. That was a 6.5 percent discount to yesterday’s closing price. The Philippine Stock Exchange Index rose less than 0.1 percent.

GS Yuasa Corp. (6674), a Japanese maker of batteries, fell 2.6 percent to 608 yen after Mitsubishi UFJ Morgan Stanley Securities lowered its rating to neutral from outperform.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Emma O’Brien in Wellington at eobrien6@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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