Asian Stocks Retreat as Japanese Banks Fall on Earnings

Asian stocks fell, with the regional gauge retreating from a five-year high, as a drop in Japanese banks after forecasting lower earnings offset a report that Japan’s economy expanded faster than analysts estimated.

Mitsubishi UFJ Financial Group Inc. sank 3.6 percent, leading Japanese lenders lower. Daewoo Shipbuilding & Marine Engineering Co., South Korea’s third-biggest shipbuilder, fell 10 percent as first-quarter profit plunged. Tokyo Electric Power Co. surged 19 percent, leading Japanese utilities higher.

The MSCI Asia Pacific Index slid 0.4 percent to 142.61 as of 5:39 p.m. in Tokyo. About 10 shares fell for every nine that rose on the measure. The gauge increased 11 percent this year through yesterday as the Bank of Japan took steps to counter deflation and policy makers in the U.S. and Europe remained on standby to buoy growth.

“The market, particularly in Japan, looks overbought and needs a pullback,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $126 billion, said by phone. “We’re not going to see a full reversal at this stage. The effects of aggressive monetary stimulus in Japan is just starting to gain traction.”

Japan’s Nikkei 255 Stock Average dropped 0.4 percent, after yesterday closing at the highest level since December 2007. The broader Topix Index fell 0.6 percent, after earlier rising as much as 0.5 percent. The 14-day relative strength index, a measure of trading momentum, has held above 70 for both gauges, a level some traders say signals a sell-off.

Japan GDP

The Nikkei 225 and the Topix both climbed about 45 percent this year as the Bank of Japan introduced unprecedented monetary easing and the U.S. economy showed recovery signs.

Japan’s gross domestic product rose an annualized 3.5 percent in the three months through March, the most in a year, the Cabinet Office said today in Tokyo. The median of 36 economists’ forecasts in a Bloomberg News survey was for 2.7 percent. Fourth-quarter growth was revised to 1 percent.

Australia’s S&P/ASX 200 Index lost 0.5 percent, while South Korea’s Kospi index advanced 0.8 percent.

Hong Kong’s Hang Seng Index added 0.2 percent and China’s Shanghai Composite Index climbed 1.2 percent.

Shares on the MSCI Asia Pacific Index traded at 14.4 times estimated earnings yesterday, compared with 21 for the Nikkei 225, 15 for the Standard & Poor’s 500 Index and 13.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

U.S. Futures

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The index rose 0.5 percent to a fresh record in New York yesterday after data showing weakness in manufacturing fueled bets the Federal Reserve will be in no hurry to scale back stimulus. Industrial production declined in April by the most in eight months.

Japanese lenders declined as companies from Mitsubishi UFJ, the country’s biggest publicly traded lender by market value, to Sumitomo Mitsui Financial Group Inc. forecast earnings will drop this year as monetary easing makes loans less profitable even as borrowing picks up amid an economic recovery.

Mitsubishi UFJ slipped 3.6 percent to 706 yen. Sumitomo Mitsui lost 3 percent 4,770 yen. Mizuho Financial Group Inc. declined 3.1 percent to 219 yen.

Daewoo Shipbuilding slumped 10 percent to 25,600 won in Seoul, the most on the MSCI Asia Pacific Index. The company reported yesterday that first-quarter net income plunged 42 percent from a year earlier to 48.9 billion won ($43.9 million). Macquarie Group Ltd. reduced its rating on the stock to neutral from outperform.

Earnings Performance

Virgin Australia Holdings Ltd., the nation’s second-largest carrier, dropped 17 percent to 38 Australian cents in Sydney after forecasting that annual profit would slip for the third time in five years.

Of the 475 companies on the MSCI Asia Pacific Index that reported results since the beginning of April and for which estimates are available, 53 percent are exceeded expectations, while 47 percent fell short, according to data compiled by Bloomberg.

Among stocks that advanced, Dai-ichi Life Insurance Co., Japan’s second-largest life insurer, climbed 3.9 percent to 161,600 yen in Tokyo after projecting a 14 percent profit increase and announcing a 100-for-1 stock split.

Olympus Corp. surged 18 percent to 3,215 yen in Tokyo after the maker of digital cameras and endoscopes projected profit that topped analyst estimates.

Tepco jumped 19 percent to 613 yen, the biggest advance in the Asian gauge. The stock is heading for 37 percent advance this week after Prime Minister Shinzo Abe was quoted by the Yomiuri newspaper on May 14 as saying Japan’s biggest power utility shouldn’t take full blame for the Fukushima nuclear meltdowns. Eurus Energy Holdings Corp., a joint venture between Tepco and Toyota Tsusho Corp., yesterday announced plans to build a 115-megawatt solar power station in northern Japan.

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