Asia Shares Drop This Week to Cap Biggest Monthly Loss Since May

Asian stocks fell for a fifth week, with the regional benchmark index capping its biggest monthly loss since May, as concern that the global economic recovery is faltering spurred investors to sell riskier assets.

Toyota Motor Corp., the world’s biggest carmaker, lost 4 percent this week in Tokyo as the yen completed its steepest monthly gain against the dollar since April 2012. Treasury Wine Estates Ltd., the Australian maker of A$785-a-bottle ($686) Penfolds Grange, slumped 20 percent after cutting its profit outlook on austerity measures in China. Sino-Ocean Land Holdings Ltd. sank 7.9 percent in Hong Kong as the Securities Journal reported some property developers in China may face financing problems as regulators rein in shadow lending.

The MSCI Asia Pacific Index dropped 2.1 percent to 134.81 this week, the biggest weekly decline since August and capping a 4.6 percent fall in January. Global stocks tumbled as a sell off in emerging-market currencies prompted central banks to boost borrowing costs while the Federal Reserve moved ahead with a plan to further reduce stimulus.

“It’s been unsettling,” said Benjamin Collett, Hong Kong-based head of Asian equities at Sunrise Brokers LLP. “Volatility is up. If you want to step into this market, you have to be prepared to handle bigger swings, and evidently many exiting holders don’t like that.”

Japan’s Topix (TPX) index slumped 3.5 percent this week. The Nikkei 225 Stock Average tumbled 3.1 percent to cap its biggest monthly rout since May 2012 as a gauge tracking the volatility of the stock measure surged 28 percent.

Regional Indexes

Australia’s S&P/ASX 200 Index (AS51) declined 1 percent and New Zealand’s NZX 50 Index was little changed. Hong Kong’s Hang Seng Index fell 1.9 percent while the Hang Seng China Enterprises Index of mainland Chinese stocks listed in the city slid 2 percent. China’s Shanghai Composite Index (SHCOMP) lost 1 percent, while Singapore’s Straits Times Index dropped 1.6 percent.

Most markets in Asia, including Hong Kong, China and Singapore, were closed on Jan. 31 for Chinese New Year holidays.

India’s S&P BSE Sensex dropped 2.9 percent after its central bank unexpectedly raised its benchmark interest rate to 8 percent from 7.75 percent to curb inflation. Only three of 45 analysts in a Bloomberg News survey predicted the move, with the rest expecting no change.

The Fed this week said it will reduce purchases by another $10 billion to $65 billion, sticking to a plan for a gradual withdrawal from its unprecedented monetary easing. The central bank, which announced its first $10 billion reduction in December, left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that the unemployment rate falls below 6.5 percent.

Toyota, Honda

Japanese exporters declined. Toyota, which gets 75 percent of its revenue from outside Japan, lost 4 percent to 5,922 yen this week. Honda Motor Co. slid 2.6 percent to 3,893 yen. Panasonic Corp. dropped 3.6 percent to 1,184 yen, the lowest close since Dec. 18.

Volatility in emerging-market equities jumped this week, with the Chicago Board Options Exchange Emerging Markets ETF Volatility Index touching a seven-month high of 30.92 on Jan. 29.

Argentina’s central bank increased interest rates to the highest in more than a decade on Jan. 28 in an attempt to draw investors to peso assets, following the move to devalue the currency earlier in the month.

Turkey’s central bank raised all its main interest rates at an emergency meeting Jan. 29, including an increase in the one-week repo rate to 10 percent from 4.5 percent. India and South Africa unexpectedly raised rates this week, after Brazil boosted its benchmark earlier in the month.

Negative Sentiment

“Sentiment will probably remain negative and slightly cautious on some of these emerging markets over the next couple of months as the Fed tapers stimulus,” Mark Lister, head of private wealth research at Craigs Investment Partners Ltd. in Wellington, said by phone. “Given that there’s a bit of disappointment with recent earnings, things could weaken off a little bit this year.”

The MSCI Asia Pacific index traded at 12.7 times estimated earnings compared with a multiple of 15.1 for the Standard & Poor’s 500 Index and 13.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Of the 178 companies on the MSCI Asia Pacific Index that have reported earnings since the beginning of January and for which estimates are available, 51 percent missed analyst projections for profit, according to data compiled by Bloomberg.

“There is still money on the table to be taken off, so over the less-than-impressive earnings season, the tendency will always be to protect your profit,” said Sunrise’s Collett.

Gift Crackdown

Treasury Wine Estates slumped 20 percent to A$3.64 this week in Sydney after saying first-half earnings fell as China’s crackdown on official gift giving curbed demand for premium vintages.

Profit before interest, tax and other items dropped to between A$42 million and A$46 million in the six months ended Dec. 31, from A$73.4 million a year earlier, the company said.

Sino-Ocean Land fell 7.9 percent to HK$4.18, its steepest weekly decline since March. There is an oversupply of real estate in China’s tier-3 and tier-4 cities, the Securities Journal cited Chen Yifeng, chairman of Topina Capital, as saying. The nation’s broadest measure of new credit fell in December while money-supply growth and new yuan loans trailed estimates amid a cash crunch and government efforts to curb speculative lending.

Among stocks that rose this week, Yamato Holdings Co. jumped 9.9 percent to 2,170 yen after the provider of delivery services said it would buy back as much as 10 billion yen, or 1.53 percent, of its shares.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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