Most Asian Stocks Drop on Higher Valuations, Stronger Yen
Most stocks on Asia’s benchmark regional stock index dropped after valuations climbed to near their highest level in six months. Japanese exporters declined as the yen strengthened, while gold producers advanced.
Honda Motor Co. (7267), Japan’s second-biggest automaker by market capitalization, slid 2 percent. Doosan Engineering & Construction Co. (011160) sank 15 percent after the Korea Economic Daily said the provider of architectural services will sell redeemable convertible preferred shares. Perseus Mining Ltd. rose 3.6 percent to lead a rebound in gold producers as the precious metal rallied before the close of Australian trading.
More than five stocks fell for every four that rose on the MSCI Asia Pacific Index. The gauge slipped 0.2 percent to 141.54 at 9:02 p.m. in Hong Kong. The equity benchmark has gained 9.4 percent this year as central banks around the world pledged to leave interest rates near record lows for a prolonged period.
“People have become a little bit blasé about the risks and that’s creating an environment where we are a little too stretched,” Angus Gluskie, who helps oversee about $550 million as a fund manager at White Funds Management in Sydney, said by telephone. “The market is ready for a technical pullback and we have taken some money off the table. We are now cautious.”
Companies listed on the MSCI Asia Pacific traded at 13.9 times estimated earnings today, close to the multiple of 14 reached on Nov. 18, which was the highest price-earnings ratio since May, according to data compiled by Bloomberg.
Japan’s Topix index fell 0.5 percent. Australia’s S&P/ASX 200 Index added 0.1 percent, while New Zealand’s NZX 50 Index lost 0.5 percent. South Korea’s Kospi index advanced 0.3 percent.
Singapore’s Straits Times Index dropped 0.2 percent. Taiwan’s Taiex Index climbed 0.7 percent. Hong Kong’s Hang Seng Index dropped less than 0.1 percent, while China’s Shanghai Composite slipped 0.1 percent.
Minutes of the Fed’s October meeting released Nov. 20 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated. Stimulus from the Fed has helped the S&P 500 (SPX) soar 166 percent since its March 2009 low. The index has advanced 26 percent this year, poised for its best annual performance in a decade.
Four of every five investors expect the Fed will put off a decision to begin reducing monetary stimulus until March 2014 or later, according to a Bloomberg Global Poll of investors, traders and analysts who are subscribers. Just 5 percent are looking for a move at the central bank’s Dec. 17-18 meeting, the Nov. 19 poll showed.
“The global economic environment is improving so this should be constructive for equities,” Tai Hui, Hong Kong-based chief Asia market strategist at JPMorgan Asset Management, which oversees about $2.2 trillion globally, told Bloomberg TV. “We should be looking at a continued increase in our portfolio allocation to equities.”
Bank of Japan Governor Haruhiko Kuroda helped drive a 46 percent surge in Japan’s Topix this year by maintaining monetary easing as he and Prime Minister Shinzo Abe sought to jolt the nation out of 15 years of deflation. The Topix is the best performing of 24 developed markets tracked by Bloomberg.
Most Bank of Japan board members agreed that inflation was likely to reach around 2 percent toward the latter half of the projection period of between the 2013 and 2015 fiscal years, according to minutes of the Oct. 31 meeting released today in Tokyo.
The yen gained 0.3 percent to 101.37 per dollar, dragging Japanese exporters lower. Honda fell 2 percent to 4,280 yen. Toyota Motor Corp. (7203) retreated 1.2 percent to 6,350 yen.
Perseus Mining advanced 3.6 percent to 28.5 Australian cents, rebounding from yesterday’s 5.2 percent slide. Evolution Mining Ltd. added 1.7 percent to 61.5 cents, following its 5.5 percent decline yesterday. Gold slipped 0.2 percent to $1,248.25 per ounce after earlier gaining as much as 0.6 percent.
Doosan Engineering slumped 15 percent to 1,855 won in Seoul. The firm is seeking to sell redeemable convertible preferred shares by year-end to repay matured debt, the Korea Economic Daily reported. Doosan separately said yesterday it will reduce capital to 285.9b won from 2.77t won to help enhance shareholder value.
China Petroleum & Chemical Corp., also known as Sinopec, lost 2.6 percent to HK$6.65. Chinese authorities detained seven employees from the nation’s biggest refiner following the death of 55 people in a pipeline blast.
Futures on the Standard & Poor’s 500 Index rose 0.1 percent today. The gauge fell yesterday, after seven consecutive weekly gains as energy shares retreated following Iran’s agreement to limit its nuclear program in exchange for the partial relaxation of sanctions on oil exports.
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