Asia Stocks Heading for First Monthly Drop Since October

Asian stocks slid, with the regional benchmark index’s heading for its first monthly decline since October, as a drop in Japanese shipping lines limited a rebound in the nation’s shares and utilities slumped.

Japanese shipping companies dropped, with Mitsui O.S.K Lines Ltd. falling 4.2 percent, as a gauge of freight rates headed for its steepest monthly decline this year. Huaneng Power International Inc. slid 3.4 percent in Hong Kong, pacing declines among utilities. Singapore Airlines Ltd., fell 0.9 percent after it placed aircraft orders worth $17 billion, sparking concern aggressive expansion by Southeast Asia’s biggest carrier may crimp dividends.

The MSCI Asia Pacific Index slid 0.4 percent to 135.00 as of 6:25 p.m. in Tokyo, paring gains of as much as 0.8 percent. About five shares fell for every four that rose on the gauge. The measure is set for a two-week drop and a 5 percent loss in May, its biggest monthly decline in a year. Japanese indexes entered a correction yesterday after reaching about five-year highs on May 22.

“The market is trying to find a place to settle,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees about $33 billion. “We don’t know where the bottom is yet.”

India’s S&P BSE Sensex fell dropped 2 percent, the most among the region’s benchmark indexes. Singapore’s Straits Times Index fell 0.7 percent, closing at the lowest since April 23. Hong Kong’s Hang Seng Index slid 0.4 percent, while the Shanghai Composite Index lost 0.7 percent.

Exaggerated Moves

Japan’s Nikkei 225 Stock Average gained 1.4 percent, with the measure’s volatility about 60 percent above average. Fast Retailing Co. and Fanuc Corp., which together account for about 15 percent of the benchmark, each added more than 4 percent. Volume on the measure was 13 percent below the 30-day average.

The broader Topix index closed up 0.1 percent after gaining as much as 2 percent in morning trading. Both gauges plunged more than 10 percent through yesterday from their May 22 high, entering what some investors define as a correction.

“Price moves are being exaggerated by thin volume” as investors stay on the sidelines, said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “You can’t be bullish after the market fell so much, but with foreign markets being so resilient, you can’t be too bearish.”

Japanese markets halted yesterday’s slide as a report showed the nation’s industrial production rose 1.7 percent in April, exceeding the highest estimate in a Bloomberg News survey of economists and helping Prime Minister Shinzo Abe’s economic-revival campaign. A separate report showed consumer prices dropped for a sixth straight month in April, in line with expectations.

Pension Fund

Japan’s $1 trillion Government Pension Investment Fund is considering changes that would allow greater investment in shares, Reuters reported yesterday, citing unidentified people familiar with the matter. The shift would be the fund’s most significant revision in strategy since 2006, according to the news agency.

Even after yesterday’s plunge, the Topix and the Nikkei 225 are still up more than 30 percent this year after the Bank of Japan pledged to reach 2 percent inflation within two years with unlimited bond buying and by doubling the monetary base.

Australia’s S&P/ASX 200 Index closed 0.1 percent lower, taking its monthly loss to 5.1 percent, the biggest in a year. New Zealand’s NZX 50 Index climbed 0.9 percent. South Korea’s Kospi index and Taiwan’s Taiex Index both gained 0.1 percent.

Futures on the Standard & Poor’s 500 Index dropped 0.7 percent. The gauge rose 0.4 percent yesterday as weaker-than-expected data on economic growth and jobless claims boosted speculation the Federal Reserve will maintain stimulus.

Shipping Slump

Shares on the MSCI Asia Pacific Index traded at 13.3 times estimated earnings yesterday, compared with 15 for the S&P 500 and 13.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg News.

Japanese shipping companies declined, with the Topix Marine Transport measure down almost 20 percent from its 52-week high, the third-biggest decline among the Topix industry groups. The Baltic Dry Index, which tracks the price of transporting commodities from iron ore to corn, headed for a 6 percent drop this month, the most this year.

Mitsui O.S.K, Japan’s second-biggest shipper by market value, lost 4.2 percent to 369 yen today. Nippon Yusen KK, the largest, declined 1.9 percent to 266 yen.

Huaneng, Kansai

Utilities posted the biggest decline among the 10 industry groups in the regional benchmark index. U.S. bond yields increase to 2.23 percent on May 29, the highest level since April 5, 2012, stiffening competition with stock payouts among investors seeking income. Shares on the MSCI AC Asia Pacific Utilities Index offer a dividend yield close to that of 10-year U.S. Treasuries.

Huaneng Power, the publicly traded unit of China’s largest electricity producer, slid 3.4 percent to HK$7.98 in Hong Kong. Datang International Power Generation Co. dropped 3 percent to HK$3.20. Kansai Electric Power Co. decreased 5.9 percent to 1,204 yen in Tokyo.

Singapore Air slid 0.9 percent to S$10.74, closing at its lowest in more than a month. The company’s plane order “spooked” investors on concern the purchase would impact future dividend payouts, K Ajith, an analyst at UOB-Kay Hian Holdings Ltd., said by phone.

Among stocks that advanced, Sony Corp. gained 2.1 percent to 2,049 yen. The electronics maker is working with Morgan Stanley and Citigroup Inc. as it considers adopting billionaire Daniel Loeb’s proposal for an initial public offering of its entertainment unit, people familiar with the matter said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE