Most Asian Stocks Drop as China Manufacturing Slows

Most Asian stocks fell, with the regional benchmark index heading for its first decline in three days, after a preliminary report showed Chinese manufacturing expanded less than economists estimated.

Agricultural Bank of China Ltd., the nation’s third-largest lender, slid 2.3 percent in Hong Kong. Yamada Denki Co. sank 4.8 percent in Tokyo after the consumer electronics retailer missed its full-year profit forecast. Woodside Petroleum Ltd., Australia’s second-biggest oil producer, jumped 9.7 percent after announcing plans to return cash to shareholders.

The MSCI Asia Pacific Index fell 0.04 point, or less than 0.1 percent, to 137.34 as of 7:58 p.m. in Tokyo, after rising 0.3 percent and dropping 0.3 percent. About eight shares retreated for every five that increased on the gauge. The measure climbed 6.2 percent this year through yesterday as Japanese equities rallied on speculation the Bank of Japan will step up efforts to stimulate its economy. China’s manufacturing is expanding at a slower pace this month, according to a preliminary report today.

“There could be some overreaction in the market,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management Asia Ltd., whose Japan-based parent oversees about $165 billion. “I’m not too worried over China’s softening economic data. The government is introducing policies to make sure the economy moves along a sustainable growth path. Valuations are still OK and earnings are still growing.”

China PMI

China’s Shanghai Composite Index dropped 2.6 percent, the most since March 28. The preliminary reading of 50.5 for a Purchasing Managers’ Index, a gauge of manufacturing activity that was released by HSBC Holdings Plc and Markit Economics, compared with a final reading of 51.6 for March. The number was also below the median 51.5 estimate in a Bloomberg News survey of 11 analysts. A reading above 50 indicates expansion.

Hong Kong’s Hang Seng Index slipped 1.1 percent. Japan’s Nikkei 225 Stock Average lost 0.3 percent as the yen advanced, moving away from the 100-to-the-dollar level. South Korea’s Kospi Index and Taiwan’s Taiex Index both dropped 0.4 percent.

Australia’s S&P/ASX 200 Index gained 1 and New Zealand’s NZX 50 Index added 0.7 percent.

Shares on the benchmark MSCI Asia Pacific Index traded at 14 times estimated earnings as of yesterday compared with 14.1 for the Standard & Poor’s 500 Index and 12.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index increased 0.1 percent today. The gauge climbed 0.5 percent yesterday as Caterpillar Inc. jumped and a rally in commodity prices spurred energy and raw-material producers.

‘Prevailing Uncertainties’

Chinese lenders declined. Agricultural Bank of China sank 3.1 percent to HK$3.42 in Hong Kong, heading for the biggest drop since Feb. 5. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, slipped 0.8 percent to HK$5.21. China Construction Bank Corp. fell 1.3 percent to HK$6.14.

“Investors are worried about whether the recovery of the Chinese economy will continue,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. “If you look at the number, it’s still above 50, so it’s not bad. But market sentiment remains cautious because there are still prevailing uncertainties like bird flu and the earthquake in Sichuan.”

Anhui Conch Cement Co., China’s biggest maker of the material, slid 3.3 percent to HK$28 as its first-quarter profit dropped 22 percent. China Mobile Ltd., the world’s largest phone company by subscribers, lost 0.9 percent HK$81.85 after posting its weakest profit growth in three quarters.

Earnings Performance

Of the 52 companies on the MSCI Asia Pacific Index that reported results since April 1 and for which estimates are available, 52 percent exceeded expectations, while 48 percent missed forecasts, according to data compiled by Bloomberg News.

Yamada Denki sank 4.8 percent to 4,710 yen in Tokyo. The company said yesterday it expects to report full-year net income 22 billion yen ($223 million), compared with its previous forecast of 34 billion yen.

Among stocks that advanced, Woodside Petroleum jumped 9.7 percent to A$37.96 in Sydney, the biggest advance since November 2008. The company said it will return about $520 million to investors in dividends after dropping plans to build a liquefied natural gas project estimated to cost $45 billion.