Asian stocks tumbled, dragging the region’s key benchmark index to its longest series of weekly losses in seven years, on concern faltering U.S. economic growth and Greece’s worsening sovereign debt crisis will derail the global economic recovery.
Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest source of revenue, slumped 8.2 percent this week. LG Electronics Inc., the world’s third-biggest mobile phone maker by sales, plunged 8.3 percent in Seoul. Toyota Motor Corp., the world’s No. 1 carmaker, dropped 3.8 percent in Tokyo after forecasting a drop in profit as Japan’s record earthquake disrupted production.
The MSCI Asia Pacific Index declined 1.9 percent to 129.60 this week amid concern the global economic recovery may be derailed as manufacturing in New York unexpectedly shrank and Greek Prime Minister George Papandreou fired his finance minister in a Cabinet overhaul aimed at fending off a party rebellion and ensuring the passage of austerity measures needed for a bailout.
“Investors still get nightmares from the events of 2008 and nobody wants to see an encore,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management Ltd. in Sydney. “Europe has the potential to set off another global credit crisis, which is the biggest worry.”
Japan’s Nikkei 225 Stock Average slid 1.7 percent this week. South Korea’s Kospi index dropped 0.7 percent. Australia’s S&P/ASX 200 Index fell 1.7 percent. Hong Kong’s Hang Seng Index declined 3.2 percent. The gauge entered a so-called correction on June 16 after falling more than 10 percent from its recent high on April 8.
China’s Shanghai Composite Index declined 2.3 percent after the central bank ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years in May.
The MSCI Asian gauge’s seven-week slump exceeded a six-week streak of declines in the aftermath of the collapse in Lehman Brothers Holdings Inc. in 2008, on speculation Greece will default on its debt payments.
Former Federal Reserve Chairman Alan Greenspan said that a default by Greece is “almost certain” and could drive the U.S. economy into recession following the failure of European Union officials to break a deadlock on negotiations for a second Greek aid plan.
“The problem you have is that it’s extremely unlikely the political system will work” in a way that solves Greece’s crisis, Greenspan, 85, said in an interview with Charlie Rose in New York on June 16. “The chances of Greece not defaulting are very small.”
Esprit plunged 8.2 percent through the week to HK$25.65 in Hong Kong. Cosco Pacific Ltd., which operates container facilities at Piraeus, Greece’s largest port, dropped 5.3 percent to HK$13.24. Canon Inc., a camera maker that counts Europe as its market, decreased 2 percent to 3,690 yen in Tokyo.
“It’s another riot point in markets with the EU debt crisis intensifying and growth losing significant momentum,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which has almost $100 billion under management. “It looks like there’s still more downside in markets.”
Exporters dropped after reports showed manufacturing in the New York region unexpectedly shrank in June and confidence among U.S. homebuilders slumped to the lowest level in nine months.
Sales in U.S.
LG Electronics, which gets about 30 percent of sales from the U.S., fell 8.3 percent to 79,800 won in Seoul. Li & Fung Ltd., the world’s biggest supplier of toys to retailers including Wal-Mart Stores Inc. and Target Corp., tumbled 12 percent to HK$14.14 in Hong Kong. Honda Motor Co., a carmaker that counts North America as its main source of revenue, lost 1.9 percent to 2,927 yen in Tokyo.
HTC Corp., the Taiwanese maker of smartphones that use operating systems from Google Inc. and Microsoft Corp., slumped 14 percent to NT$998. Macquarie Group Ltd. on June 15 lowered its rating on the stock to “neutral” from “outperform,” saying competition from makers of low-cost handsets will increase. UBS AG removed the stock on its list of preferred technology stocks.
Samsung Electronics Co., the world’s second-biggest maker of mobile phones by sales, fell 3.8 percent to 819,000 won. Research In Motion Ltd., whose BlackBerry phones are losing market share to Apple Inc.’s iPhone, said on June 16 quarterly revenue may drop for the first time in nine years.
‘Wall of Worry’
“There’s really a wall of worry out there at the moment,” said Matt Riordan, who helps manage close to $7 billion in Sydney at Paradice Investment Management Pty. “It’s hard to build an optimistic story. The one ray of hope may be the extent to which this is a lull that’s been caused by temporary issues.”
Toyota Motor Corp., the world’s biggest automaker, declined 3.8 percent to 3,175 yen. The company said on June 10 net income may fall 31 percent to 280 billion yen ($3.5 billion) in the year ending March 31 from a year earlier after Japan’s record earthquake disrupted production and sales. The company said yesterday it’s working with parts makers to restore supply of 30 types of components.
The Nikkei has plunged 10 percent since March 10, the day before the magnitude-9 earthquake and tsunami that devastated Japan’s northeastern coast, triggering the worst nuclear accident in 25 years, disrupting supply chains, and leaving more than 23,000 people dead or missing.
“The government’s reconstruction policy isn’t moving ahead,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $28 billion. “Even before the quake, the domestic economy was weak and you had a lot of firms dependant on overseas markets. Now, with government in such confusion, investing in the domestic market makes even less sense.”
Prime Minister Naoto Kan’s ruling Democratic Party of Japan on June 15 proposed scaling back a second disaster reconstruction package to 2 trillion yen ($25 billion), or half of the size of the first one. Kan two weeks ago survived a no-confidence vote by pledging to resign once the crisis from the March earthquake and the meltdowns at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant are contained.
Shimizu Corp., Japan’s biggest construction company by sales, declined 7.6 percent to 318 yen, leading builders lower. Smaller rival Kajima Corp. sank 4.3 percent to 222 yen. Obayashi Corp. plunged 5.9 percent to 336 yen.
Among stocks that advanced, Tokyo Electric surged 59 percent to 302 yen, the biggest gain on the MSCI Asia Pacific Index. The Tokyo Stock Exchange raised the collateral requirement for short sales of the utility to 50 percent from 30 percent, discouraging speculators by making the trade more expensive.
The utility has lost 86 percent of its value since its Fukushima Dai-Ichi nuclear plant was destroyed on March 11. Tokyo Electric is the worst-performing stock on the Nikkei 225 Stock Average since the quake.