Asian equities fell the most since July this week as Chinese manufacturing data missed estimates and amid concern that the U.S. might begin to unwind stimulus. Japanese shares had the largest one-day plunge since March 2011.
The Topix Index plummeted 6.9 percent on May 23, wiping $314 billion from the world’s best-performing stock market this year. Sumitomo Mitsui Financial Group Inc. led a plunge among Japan’s largest financial companies as the country’s bonds dropped to a one-year low, stoking concern about the nation’s balance sheet. A gauge of Australian banks fell 6.6 percent in Sydney, the most since the May 2012 Greek crisis, on speculation that slowing growth in China will undermine the resource-based economy.
The MSCI Asia Pacific Index slid 2.7 percent, the biggest weekly decline since the week ended July 13, 2012. The gauge rose 10 percent this year through May 17 amid signs of improvement in the U.S. economy and unprecedented stimulus efforts in Japan. A measure of Asia-Pacific shares outside Japan dropped 2.6 percent this week, leaving it virtually unchanged for the year as Chinese data signals a slowdown in the world’s No. 2 economy.
“The market run has been so skewed toward high-yielding stocks and financials in Australia, and now with worries about China, foreign investors are withdrawing,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $126 billion, said by phone. “Australian shares will underperform this year. There are lots of reasons for profit taking right now. In Japan, there are still lots of challenges and structural changes that need to take place.”
The MSCI Asia Pacific Index trades for 13.7 times estimated earnings. That compares with multiples of 15 for the Standard & Poor’s 500 Index and 13.3 for the Stoxx Europe 600 Index. The Topix traded as much as 24.8 times earnings this week, higher than 86 percent of days since 2004, data compiled by Bloomberg show.
Japan’s broadest equity gauge, still this year’s best performing major equity benchmark, plunged in record volume on May 23. It was the first time since April 2005 that every company on the Nikkei 225 Stock Average retreated.
The slide triggered a halt in Osaka-traded index futures on May 23 and cut the measure’s 2013 advance to 38 percent from 48 percent. Gains for the Topix remain more than twice as big as in the Standard & Poor’s 500 Index this year. The measure, which finished the week 4.7 percent lower, is still up 2.8 percent for the month.
Financial shares led the plunge, which JPMorgan Asset Management and Pinebridge Investments LLC said was overdue. About $1.2 trillion was added to equities since Nov. 14, when elections were announced that brought Prime Minister Shinzo Abe to power on the promise of massive stimulus and Bank of Japan action to end two decades of deflation.
“Everyone is surprised at today’s drop, but it was overdue,” said Grace Tam, Hong Kong-based global market strategist at JPMorgan Asset Management Ltd., which oversees about $1.5 trillion globally and increased holdings of Japanese shares on May 23. “Many investors looking for an opportunity to buy can find a good entry point now. It’s a short-term correction.”
Japanese equities had risen “too much, too fast,” especially financial stocks, former Ministry of Finance official Eisuke Sakakibara, known as “Mr. Yen” for his efforts to influence exchange rates in the late 1990s, said in a Bloomberg interview on May 15. Shares needed “some kind of correction” before resuming their climb, he said.
Sumitomo Mitsui Financial plunged 11 percent, the most among the 30 biggest stocks on the Topix, as financial shares led the rout in Tokyo. Nomura Holdings Inc., Japan’s No. 1 brokerage, retreated 7.6 percent to 868 yen after more than tripling since mid-November.
All 44 members of the Topix Real Estate Index, the worst performing of the benchmark measure’s 33 industries this week, declined. Gauges of consumer lenders, brokers and banks dropped more than 9 percent.
Mitsubishi Estate Co., Japan’s biggest real-estate company, dropped 10 percent to 2,652 yen. Sun Frontier Fudousan Co., a property management and renovation company, had the biggest drop for the sector, plunging 26 percent to 86,600 yen.
Elsewhere in the region, Australia’s S&P/ASX 200 Index dropped 3.8 percent for the week as banks plunged the most in a year. The Australian dollar has been the worst-performing major currency in the current quarter, falling 7.5 percent versus the U.S. currency. It slid 1.1 percent yesterday.
Commonwealth Bank of Australia, the country’s biggest bank, hit a record high on May 20 before a four day retreat left it 6.1 percent lower for the week at A$68.77. Westpac Banking Corp., the No. 2 lender, slid 6.4 percent to A$29.32.
Shares in Hong Kong fell after U.S. Federal Reserve Chairman Ben S. Bernanke said the bank may consider winding back stimulus and after a preliminary survey from HSBC Holding Plc and Markit Economics showed manufacturing in China is contracting.
The Hang Seng Index dropped 2 percent, the most since the week ended April 5.
Li & Fung Ltd., a supplier to Wal-Mart Stores Inc., retreated 1.3 percent to HK$10.98. Belle International Holdings Ltd., a mainland women’s footwear retailer, plunged 7.7 percent to HK$11.96, near the lowest in almost a year.
China Resources Power Holdings Co. fell the most in the Hang Seng Index, retreating 11 percent to HK$20.20 after the Economic Information Daily reported May 16 that China may ban some imports of thermal coal.
Among other regional gauges the Shanghai Composite Index was little changed, while Korea’s Kospi index slid 0.7 percent. Singapore’s Straits Times Index declined 1.6 percent.