Asian Stocks Post First Weekly Drop Since August on U.S.

Asian stocks fell, with the regional benchmark index declining for first time in five weeks, amid concern that the U.S. political impasse could lead to the government defaulting on its debt.

Toyota Motor Corp., Asia’s top carmaker, dropped 4 percent, pacing declines among exporters. Leighton Holdings Ltd. tumbled 15 percent in Sydney after reports that former executives knew of alleged corruption at Australia’s biggest builder. BHP Billiton Ltd., the world’s largest mining company, slipped 3.4 percent.

The MSCI Asia Pacific Index lost 1.2 percent to 139.1 this week, led by raw-material producers and industrial companies. 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.

“The longer this political impasse goes on, the implications are greater,” Kelly Teoh, a strategist at IG Markets in Singapore, said in a telephone interview. “We need to price in the impact that this will have on the U.S. economy and that has a domino effect everywhere else. This will shave a lot of the U.S. growth off.”

Stocks around the world fell 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

Valuations for the MSCI Asia Pacific Index fell to 13.4 times estimated earnings yesterday from 13.7 times on Sept. 27, according to data compiled by Bloomberg. That compares with 15.2 for the Standard & Poor’s 500 Index and 14.1 for the Stoxx Europe 600 Index, the data show.

Japan’s Topix index slumped 4.4 percent this week, capping its longest losing streak since July 2012. The Bank of Japan maintained its monetary policy at the end of a two-day meeting yesterday, as estimated by economists surveyed by Bloomberg. Prime Minister Shinzo Abe said on Oct. 1 he’d raise the sales levy and prepare measures to soften its impact, including considering a reduction in taxes on businesses.

Australia’s S&P/ASX 200 Index (AS51) retreated 1.9 percent after the nation’s central bank left its benchmark interest rate unchanged at a record low, saying earlier cuts are still filtering through the economy. New Zealand’s NZX 50 Index fell 0.5 percent.

South Korea’s Kospi index lost 0.7 percent after the country’s exports unexpectedly dropped last month. Hong Kong’s Hang Seng Index slipped 0.3 percent, while Singapore’s Straits Times Index fell 2.3 percent. Taiwan’s Taiex index advanced 1.6 percent. China’s markets are closed for holidays until Oct. 8.

Philippine Rating

The Philippine Stock Exchange Index added 0.2 percent. Moody’s Investors Service upgraded the country’s credit rating, completing the nation’s ascent to investment rank, as President Benigno Aquino leads a growth resurgence that’s outpacing the rest of Southeast Asia.

Exporters declined amid concern the U.S. political impasse will stall the recovery of the world’s largest economy. The Treasury said the government will run out of borrowing authority Oct. 17, leaving only cash to pay the bills.

Toyota Motor sank 4 percent to 6,180 yen this week. Honda Motor Co. (7267), which gets about 47 percent of sales from North America, fell 3.4 percent to 3,710 yen.

“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 U.S. Treasury said in a report.

‘Catastrophic Effect’

“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. employment data weren’t released as scheduled yesterday 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.”

Gangster Loans

Mizuho Financial Group Inc. sank 6.3 percent to 208 yen in in Tokyo after a unit of Japan’s third-largest lender was penalized by regulators for failing to end transactions with organized crime groups.

Leighton tumbled 15 percent to A$16.74 in Sydney. The company allegedly paid bribes to win contracts and former Chief Executive Officers Wal King and David Stewart were aware of the conduct, according to an Age newspaper report, versions of which were published in other Fairfax Media Ltd. papers. King denied the allegation and a spokeswoman for Stewart declined to comment.

Raw material producers dropped as copper futures fell 0.9 percent this week. BHP Billiton declined 3.4 percent to A$35.13. Rio Tinto Group (RIO), the world’s second-largest mining company, sank 4.5 percent to A$60.47. Jiangxi Copper Co., China’s biggest producer of the metal, slipped 3.2 percent to HK$14.94.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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