Asian Stocks Drop as Japan Slips, China's Export Slump Deepens

  • Asia-Pacific gauge headed for biggest decline in three weeks
  • Stronger yen hits Japanese exporters as economy shrinks

China’s Export Slump Deepened in February

Asian stocks dropped, with the regional benchmark index heading for its biggest decline in three weeks. Japanese shares fell for a second day as a stronger yen cut the earnings outlook for exporters while China’s export slump deepened in February.

The MSCI Asia Pacific Index fell 0.7 percent to 125.38 as of 4:07 p.m. in Hong Kong, reversing an early gain of 0.2 percent. The Topix index declined 1 percent in Tokyo, the biggest drop since Feb. 19, as the yen climbed against the dollar. Revised data showed Japan’s economy shrank an annualized 1.1 percent in the fourth quarter, the second contraction in three quarters.

“We might be experiencing a bit of exuberance,” Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Ltd. in Sydney said by phone. “While we’ve seen a significant improvement in sentiment, we’ve also seen very significant movement in prices. Japanese markets have gone up significantly, making them vulnerable for a correction. The GDP has acted as a trigger for the selloff in Tokyo. ”

The Hang Seng China Enterprises Index slipped 1.4 percent, while China’s Shanghai Composite Index finished 0.1 percent higher, after slumping as much as 3.3 percent earlier. The nation’s exports tumbled 25.4 percent from a year earlier in dollar terms in February as imports fell for the 16th month in a row. The National People’s Congress continues in Beijing.

Regional Gauges

Australia’s S&P/ASX 200 Index lost 0.7 percent, erasing gains of as much as 0.8 percent. South Korea’s Kospi index slipped 0.6 percent. Singapore’s Straits Times Index lost 1.2 percent. Hong Kong’s Hang Seng Index 0.7 percent. Taiwan’s Taiex index added 0.1 percent. New Zealand’s S&P/NZX 50 Index gained 0.4 percent.

Chinese Premier Li Keqiang outlined an economic growth target of between 6.5 percent and 7 percent for 2016, with 6.5 percent pegged as the baseline through 2020. To reach the target, the government said it raised its money supply expansion target and will permit a record deficit.

Commodities have been boosted by prospects China will boost efforts to right its economy after leaders at the weekend said they’re planning a record-high budget deficit amid expectations growth will slow in 2016. The European Central Bank also is forecast to deliver monetary easing measures this week.

‘Short-term Pullback’

“While there’s a likelihood of a pullback in the short term, investors should use this as an opportunity to buy into value plays,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $115 billion. “The tail risk from China continues to reduce. It’s quite clear that they are pretty keen to stabilize growth. That’s positive for commodities, emerging markets and global growth.”

Japanese exporters declined, with Toyota Motor Corp. and Sony Corp. sliding at least 1.7 percent as the yen strengthened for a second day. Suzuki Motor Corp. slumped 3.8 percent after announcing plans to sell 200 billion yen ($1.8 billion) in convertible bonds. Keppel Corp., the world’s biggest oil-rig builder, slumped 6.1 percent in Singapore, the steepest decline since Jan. 20, after agreeing with customer Transocean Ltd. to defer delivery of five jack-up rigs until 2020.

Futures on the Standard & Poor’s 500 Index fell 0.7 percent. The underlying benchmark index rose 0.1 percent on Monday as commodity producers surged with crude, offsetting declines in technology and consumer shares.

Brent crude dropped as much as 1.6 percent on Tuesday after breaching $40 a barrel on Monday as major producers meet to discuss an output freeze. Iron ore soared by a record after Chinese policy makers signaled their willingness to buttress economic growth, boosting the outlook for steel consumption.

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